ipd_cost_code_v5

IPD Cost Code

Measuring the costperformance of buildings

In association with:

About IPD Occupiers

IPD Occupiers provides high quality performance analysis,benchmarking and research services to public and private sectorusers of corporate property. This work is founded on our industrystandard measurement frameworks, collectively entitled the IPDOccupiers Global Estate Measurement Standards (GEMS). OurGEMS currently consists of three documents:

• IPD Cost Code - Our award-winning and well-establishedframework for collecting property cost information.

• IPD Environment Code - A globally launched good practiceframework for collecting property-related environmentalinformation.

• IPD Space Code - The recently launched conceptualmeasurement framework for collecting floor space information.

For more information, please visit: www.ipdoccupiers.com.

IPD Occupiers is part of IPD, the world leader in real estateperformance analysis. Our products and services aim to helpthose in the real estate industry, from investors to occupiers, getthe most out of their property.

About Office of Government Commerce

The Office of Government Commerce (OGC) is an independentoffice of HM Treasury, established to help Government deliverbest value from its spending. OGC provides policy standards andguidance on best practice in procurement, projects and estatemanagement, and monitors and challenges GovernmentDepartments' performance against these standards, grounded inan evidence base of information and assurance. It promotes andfosters collaborative procurement across the public sector todeliver better value for money and better public services; and itprovides innovative ways to develop Government's commercialand procurement capability, including leadership of theGovernment Procurement Service.

About Deloitte

Deloitte is one of the UK’s leading professional service firms andhas 350 professionals across audit, consulting, corporate financeand tax services dedicated to the real estate industry.

Our Real Estate Solutions practice comprises of real estate,construction and finance professionals. We work with majorcorporate occupiers to help them:

• Manage their cost bases as efficiently as possible;

• Introduce new ways of working and rationalise surplus space;

• Review Facilities Management supply arrangements; and

• Ensure their CRE functions are organised effectively and havethe processes and policies in place to manage their strategiccost base.

Copyright notice and licence policy

The IPD Cost Code (or the “Code”) is a real estate and facilities data

classification system developed and owned by Investment Property Databank

Limited (the “Company”) and protected by copyright and database right. All

rights conferred by the law of copyright and by virtue of international copyright

conventions are reserved by the Company.

The Code may not be reproduced in whole or in part without the prior written

consent of the Company.

Licences are available to consultants, advisers and other intermediaries from the

Company to use the Code to design and create cost-related real estate and

facilities information products and services. For a licence, please contact the

marketing department of the Company via www.ipd.com.

End users may use the print or electronic editions of the Code for their internal

business purposes.

All references to the Code in any document or other media must be fully and

prominently acknowledged in the following form: “Source: IPD Cost Code, ©

and database right, Investment Property Databank Limited 2009”.

The Company has no liability for any losses, damages, costs or expenses

suffered by any person as a result of any reliance on the Code.

IPD Cost Code - Measuring the cost performance of buildings 1

SponsorsIn association with:

2 IPD Cost Code - Measuring the cost performance of buildings

The IPD Cost Code is an excellent source of property costinformation enabling well-informed property decision-making. Theinclusion of a new cost measure to capture IT costs improves thebenchmark frameworks and should be considered in not onlyreducing overhead cost but in achieving best practice in servicequality and delivery. The updated reconciliation guide to otherstandards improves the comparison with other global benchmarkingand analysis and the new case studies are practical and informative.The BCO fully endorses the fifth edition of the IPD Cost Code.

Gary WingroveChairman Occupiers GroupBritish Council for Offices

The British Institute of Facilities Management is pleased to endorsethe latest edition of the award-winning IPD Cost Code as anessential guide for all professionals working in the builtenvironment industry. The facilities manager’s credibility in theboardroom will always be based on the ability to produce accurateand relevant cost and performance data in a format that will allowthe board to make strategic decisions concerning property andfacilities services. I believe that this Code will enhance the facilitiesmanager’s ability to achieve this. This latest edition helps define theimportant distinctions between OPEX and CAPEX expenditure andincludes a new cost measure to capture IT costs. Additionalmaterial has been added including new case studies from both theprivate and public sector and an important reconciliation matrix tohelp cross reference with other standards. This latest edition willhelp you keep abreast of measuring and monitoring expenditure ata time it has never been more important to control costs.

Ian FielderChief Executive Officer

British Institute of Facilities Management

The ability to capture accurate, consistent and completeinformation on the cost of occupying property is central toeffective property strategy and management. The fifth edition ofthe IPD Cost Code continues to provide a robust andcomprehensive industry standard for recording and measuringthe total cost of property occupancy. The Code providescorporate real estate managers the ability to control their costsand contribute more effectively to their organisations. CoreNetendorses the Code and supports its continued development.

Paul HarringtonPresident

CoreNet Global UK

As the demands put on the modern day facilities managerincrease along with the diversity of skills required to run anefficient operation, then the utilisation of innovative technologycoupled with accurate and dependable cost modelling andanalysis tools is a must. The IPD Cost Code provides a tried andtested framework that the Facilities Management Associationbelieves should be part of that suite for any professional facilitiesmanager.

Chris HoarDirector General

Facilities Management Association

Complementing the Space Code and the Environment Code, thefifth edition of the IPD Cost Code is a much welcomedinternationally integrated cost measurement standard of occupierorganisations that want to build a truly balanced picture ofproperty performance. All IPD Codes are fully supported withinour international OSCRE Data Exchange Standards. Thesestandards are essential for industry to exchange high volumes ofconsistent property data, shared for automatic performancereporting and truly effective benchmarking, using our openStandard XML. We look forward to working with industry, IPDOccupiers and software providers in the continuous developmentof these Standards to enable integration and efficient datamanagement.

Catherine WilliamsChief Executive Officer

OSCRE/PISCES

Reliable property performance cost analysis and the accuratemeasuring of total occupancy costs are essential for thedevelopment of effective property management strategies forboth owners and occupiers. The IPD Occupiers Cost Code iscompatible with the cost classifications set out in the RICSService Charge Code and will further enable chartered surveyorsto provide more effective corporate property management thatdelivers real business benefits.

Paul BagustChairman Corporate Occupiers GroupRoyal Institution of Chartered Surveyors

Endorsements


We are delighted to introduce the fifth edition of the IPD CostCode, IPD Occupiers' revised standard for measuring the costperformance of corporate property. This document complementsour well-established Environment Code and our recentlylaunched Space Code to provide a balanced view of propertyperformance.

With operating expenses making daily headlines, costoptimisation is back at the very top of the Real Estate andFacilities Management agenda. The objectives of the IPD CostCode are to:• Enhance our widely adopted set of definitions for costmeasurement

• Provide a transparent basis for measurement, comparison andbenchmarking

• Support the communication of data, information andknowledge

• Improve our knowledge of how we spend our second largestexpenditure

• Help organisations make better decisions in a rapidlychanging world

The IPD Cost Code is the essential starting point for propertyexecutives charged with justifying the costs of real estate.Consultation with our clients and other leading occupiers and keyindustry organisations, however, has highlighted the need toupdate our Cost Code. This fifth edition of the Cost Code hasbeen radically enhanced in a number of areas:• Clearer distinction between OPEX and CAPEX• Inclusion of a new cost measure to capture IT costs• Three new case studies from OGC, AXA Group and Centrica• Updated reconciliation guide to other standards• New worked example including cost ratios

Finally, we would like to thank the sponsors of the Cost Code.We are extremely grateful for their help and support, withoutwhich this Cost Code would not have been possible.

Hermen Jan van ReeSenior ManagerIPD Occupiers

Christopher HedleyManaging DirectorIPD Occupiers

Preface


We are delighted to have received comments and advice from arich variety of occupier and industry organisations as well asprofessional associations and academics listed below. Any errorsor omissions remain the responsibility of IPD Occupiers.

Abbey Driving Standards Agency OracleABN Amro EC Harris Orange ABSA EDF Energy PCAActium Consult Eurogem PearsonAdvanced Workplace Associates Faber Maunsell PfizerAegon First National Bank PISCESAIG Europe France Telecom PricewaterhouseCoopersAlcatel Gensler Property SolutionsAlexi Marmot Associates GlaxoSmithKline PrudentialAltys Gestion Global Actifs Pythagoras InternationalAsset Factor GPIM (Macif Immo) QinetiqAstraZeneca GVA Grimley Ramidus ConsultingAtisreal HBOS RegusAviva HOK International Remit ConsultingAXA Hollard ReutersBank of Ireland HSBC RICSBarclays IBM Rider Hunt TerotechBBC Icade Rio TintoBCO ING Royal & SunAllianceBIFM ISS Royal Bank of ScotlandBP Johnson Controls Royal MailBT Jones Lang LaSalle SavillsBull King Sturge ShellCanada Life KPMG Shire Carillion Landmark SiemensCB Richard Ellis Legal & General SkandiaCentrica Lloyds TSB Slough EstatesChadwick International London Electricity Societe GeneraleCisco London Underground Standard BankCivil Aviation Authority Marsh & McLennan Standard CharteredColliers CRE Metis Standard LifeCommerzbank MMA SulzerComputer Sciences Corp Morgan Stanley Swanke Hayden ConnellCo-operative Financial Services MWB Business Exchange TelerealCoreNet Global Nationwide Building Society TransnetCredit Agricole NB Real Estate Transport for LondonCredit Suisse First Boston Nestle United UtilitiesCushman & Wakefield Netika University College LondonDeloitte Network Rail ValeximmDeutsche Bank Npower VivendiDiscovery Health Office of Government Commerce Z/YenDrivers Jonas Old Mutual Zurich

Users and Contributions


Preface 3

1 Introduction 71.1 Purpose of the code 71.2 The cost of occupancy 9

2 Terms and Principles 112.1 Basis of calculation 112.2 Other principles 122.3 Currency and cost conversion 13

3 Cost Measures 153.1 Conceptual framework 153.2 Cost measures 16

4 Ratios and Worked Example 254.1 Budgets and targets 254.2 Cost ratios 254.3 Worked example 26

5 Applying the Code 315.1 Assessing cost performance 315.2 Data collection 315.3 Case studies 33

6 Cost Optimisation 396.1 Occupancy cost drivers 396.2 Strategic decisions 41

References 44

Appendix A - Reconciliation Guide 45

Appendix B - Mapping Guide 48

Appendix C - Measurement Template 52

Contents

In this chapter we aim to clarify the purpose of the Cost Code byanswering the following questions. What is the Cost Code and whyis it needed? What are the objectives and the benefits? What is thescope and relation with existing standards?

In addition, we describe the productivity challenge and howoccupancy costs can influence attaining the right balance betweenefficiency and effectiveness.

1.1 Purpose of the code

Given the challenges associated with measuring, analysing andreporting occupancy costs, IPD has developed the Cost Code tohelp property professionals deliver high quality performanceinformation to their organisations and other stakeholders.

The IPD Cost Code - The IPD Cost Code is our award-winningand well-established framework for the collection, measurementand analysis of occupancy cost information, involving rent,charges and taxes, fit out and furniture as well as buildingoperation, business support, property management, andinformation technology. Through use of common terminology, theCode can be applied to any building, anywhere in the world.

First launched in 1999 as the Total Occupancy Cost Code, theIPD Cost Code was relatively quickly embraced as the industrystandard for measuring property costs in the United Kingdom bya wide variety of end-user organisations. In response to feedbackfrom various multinational end-user organisations, theInternational Total Occupancy Cost Code was launched in 2001,reflecting the experience of global organisations and extending itsscope internationally.

This fifth edition of the Cost Code has been updated to reflectfeedback received over the last three years as well as ourpersonal experience in working with its fourth edition. It alsoincludes a clearer distinction between annual OPEX andannualised CAPEX, a new cost measure to capture IT costs aswell as three new case studies from OGC, AXA Group andCentrica.

Need for the Code - Keeping occupancy costs under control isthe first priority of most property executives. The IPD Cost Codeis a well-established and internationally accepted standard forcollecting, measuring and analysing occupancy costs in realestate and facilities management.

As custodians to the second largest expenditure within white-collar organisations - only next to salary and benefits - real estateand facilities managers need standard terminology to accuratelyinterpret and compare occupancy costs. It is especially thiscomparability of data which is very important for a wide range ofdecision-makers such as planners, architects, and investors - inaddition to the core target of this Code: corporate and publicsector occupiers.

Further globalisation reinforces the need for standard terminologyand a consistent set of cost definitions in order to monitor andmanage cost performance across borders.

Objectives - Most fundamentally, the Cost Code is needed tomeasure and compare the occupancy costs of buildings. Withouta globally accepted framework for measuring and reporting oncost performance, many organisations are either simply not doingit, or the quality and consistency of the data collected may bequestionable. This problem is especially acute for organisationsthat have a large number of buildings around the world and needto develop a 'global view' of occupancy costs. The Codeprovides precisely this good-practice global measurementstandard.

The objectives of this Cost Code can be summarised as follows:• Enhance our widely adopted set of definitions for costmeasurement

• Provide a transparent basis for measurement, comparison andbenchmarking

• Support the communication of data, information andknowledge

• Improve our knowledge of how we spend our second largestexpenditure

• Help organisations make better decisions in a rapidly changingworld

1 Introduction


From data to wisdom

According to systems theory, the content of the human mind can beclassified into four categories:•� Data - facts and figures•� Information - processed data•� Knowledge - applied information•�Wisdom - evaluated knowledge

The first three categories relate to the past as they deal with what hasbeen or what is known. Only the last category, wisdom, deals with thefuture because it incorporates vision and design. With wisdom, peoplecan create the future rather than just grasp the present and past. Butachieving wisdom is not easy as one must move successively throughthe other categories. By understanding relations, patterns andprinciples, one can respectively move from data to information, frominformation to knowledge, and finally from knowledge to wisdom.

Main benefits - Through use of the Cost Code propertyprofessionals will be better equipped to support financialobjectives, for example through:•� Gain clarity on occupancy costs of the buildings we use andoccupy

• Create cost performance targets and track progress over time• Support effective decision-making on expenditure and costallocation

•� Accurately and confidently communicate financialimprovements

•� Enable benchmarking against other organisations

Scope - The Cost Code is intended for the collection of data andthe analyses of information relating to the occupancy costs ofbuildings. The Cost Code is applicable to most types of building,but has been developed with particular reference to officebuildings and commercial buildings as well as manufacturingbuildings and retail buildings.

The Cost Code is being continually improved and adapted to suitthe needs of users both nationally and globally. We are pleasedto receive:•� Comments on the terms and principles contained in thisdocument

•� Comments on the cost measures contained in this document•� Details of country specific cost measurement standards•� Suggestions for improvement and future data items•� Ideas for improving the rate of acceptance

Please feedback any comment to us at [email protected] editions of this Code will benefit from your input.

Other standards - To set the Cost Code in context we haveanalysed leading cost classification standards and mapped theCost Code against them. None of these standards, to ourknowledge, have found widespread acceptance amongstoccupiers across national borders. Nor do we believe that any ofthe comparative standards have the structure or depth ofdefinition required to provide an effective platform for thecollection, measurement and analysis of occupancy costs.

The standards examined include:•� Australia: PCA - Asset Performance Scorecard•� France: IFMI - Observatoire des coûts d’exploitation desbureaux

•� Netherlands: NEN 2748 - Termen voor Facilitaire Voorzieningen•� United Kingdom: RICS Code of Measuring Practice•� United States: BOMA - Chart of Accounts•� United States: IFMA/Global FM - Global Benchmarks Survey•� United States: IMA - WorkPoint Accounting

Appendix A of this document contains a reconciliation guidebetween the IPD Cost Code and the BOMA, NEN and RICSStandards.


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1.2 The cost of occupancy

In the light of increased (global) competition and the currenteconomic climate, operating expenses and especially thepotential for reductions in these expenses make daily headlines.With the average Total Occupancy Costs of an office buildingaccounting for a significant 8 to 12 percent of an organisation’stotal operating expenses, the work environment is an obvioustarget for cost scrutiny. In order to properly manage totaloccupancy costs, however, one needs to have a clear picture ofall its components. Furthermore, one needs to understand thetrade-off between costs per m2 and per Full Time Equivalent(FTE).

Rental value growth by country - The cost of rent representsalmost one third of Total Occupancy Costs for mostorganisations. These costs are primarily driven by geography,location and building use and typically fixed for a certain periodof time. Therefore, it is essential that the strategy for propertyacquisition and the terms on which space is held (buy or lease,long or short lease term) are matched to the organisationalrequirements. Similarly, it is very important to understand the rateat which rents are growing across the market. The figure belowprovides property professionals with rental value growth (in £ perm² RFA) by indexing the rate of growth in various EU countriessince 2003.

Rental value growth by property type - Similar to rental valuegrowth by country, the figure below provides propertyprofessionals with UK rental value growth (in £ per m² NIA) byindexing the rate of growth in occupier estates for all mainproperty types in the UK since 2003. Rental value growth iscompared with the UK Retail Price Index (RPI) excludingmortgage interest payments - a key measure of inflation in the cost of goods and services.

Total Occupancy Costs by office type - IPD Occupiersconsiders Total Occupancy Costs per Full Time Equivalent (FTE)as the primary cost metric, particularly for office buildings. It isderived from a combination of the average occupancy costs perm² (cost efficiency), and the average space allocation per FTE(space efficiency). Tracking this metric over time, especially in realterms, gives the best indication of efficiency improvement in anorganisation or across the marketplace. The figure belowprovides property professionals with Total Occupancy Costs byindexing the rate of growth in occupier estates for all main officetypes since 2003.

Rental value growth by property type in the UK (£ per m2 NIA)

80

90

100

110

120

130

140 RPIRetailOfficeIndustrialResidentialOther property

2003 2004

2

2006 2007 2008

2005

2

FranceGermanyItalyNetherlandsPortugalUK

90

95

100

105

110

115

120

2003 2004 2005 2006 2007 2008

R

Rental value growth by country in the EU (£ per m2 RFA)

2005

2

90

100

110

120

130

140

150 RPIHQ officesClient-facing officesAdmin officesCall centresAll offices

2003 2004

2

2006 2007 2008

2

Total Occupancy Costs by office type in the UK (£ per FTE)

Building Operation Costs for offices - The figure below showsproperty professionals the extent to which building operationcosts (in £ per m² NIA) have developed over the last five yearscompared with the base inflationary increase in the cost of inputsinto these services (labour, raw materials and energy). Again, thisis shown by the UK Retail Price Index (RPI) excluding mortgageinterest payments.


Building Operation Costs for offices in the UK (£ per m2 NIA)

200580

100

120

140

160

180

200 RPIService chargesRepair & maintenanceManned guardingOffice cleaningTotal utilities

2003 2004 2006 2007 2008

2


In this chapter we provide an overview of the key principles to beapplied when using the IPD Cost Code. First, we distinguishbetween operating expenditure and capital expenditure indetermining Total Occupancy Costs. Furthermore, we explainadditional principles to be applied. Finally, we provide guidanceconcerning currency conversions.

2.1 Basis of calculation

The basis of calculation of Total Occupancy Costs differsbetween rented or leasehold buildings and owned or freeholdbuildings.

For rented buildings the Total Occupancy Costs are made up of:• Annual operating expenses such as rent and local propertytaxes, repair and maintenance, service charges and supportservices as well as management to reflect operating costs, and

• Annualised capital expenses such as adaptation andequipment as well as IT infrastructure and hardware to reflectcapital costs.

For owned buildings the Total Occupancy Costs are made up of:• Proxy costs for rent to reflect rental value or notional rent,• Annual operating expenses such as local property taxes andsupport services, repair and maintenance as well asmanagement to reflect operating costs, and

• Annualised capital expenses such as adaptation andequipment as well as IT infrastructure and hardware to reflectcapital costs.

Calculation of annual operating expenditure (OPEX) - Indetermining annual operating expenditure it is important toadhere to the following rules:• All capitalised costs (i.e. costs which are capitalised on thebalance sheet) are excluded from operating costs.

• All operating costs reflect the annual cost of occupation andare recorded for a complete financial year. Normally costswould be recorded for historic financial years but managers willalso want to be able to prepare budgets for future years on thesame basis.

• All costs should be recorded on the basis of expenditure on anaccruals basis for a complete financial year. All expenditureheads should be recorded separately and are by necessitymutually exclusive. This may be difficult where support servicesare bundled (see next point).

• In certain cases expenditure will need to be apportioned, forexample where contracts cover more than one building. Theapportionment should be based on an appropriatedenominator (e.g. net internal area or full time equivalent). Thecosts of multitasking staff (e.g. post room staff helping withinternal moves) should be entered under the predominantnature of the job.

• All costs are to be calculated net of any income received,including any income recoverable under a service chargepayable by a sub-tenant. Where occupiers have rented out anyof their property to other organisations, the net costs to theoccupier should be calculated. This may mean thatbenchmarking of such costs will be difficult.

• Any expenditure covered by an insurance policy - including aninternal risk charge - and any such insurance claim under thatpolicy should be excluded both as cost and incomerespectively. Occupier organisations who self-insure, therebybearing the risks themselves, will either have a nil cost underthis heading or an agreed internal risk charge, if applicable.

• Where rebates are received for overpayment these should beannualised over the period that the rebate relates to. Penaltypayments should be included in the year the expense isincurred.

• If a leasehold property is not paying rent due to a rent freeperiod, the rent free period should be treated in the samemanner as it is treated in the statutory accounts.

2 Terms and Principles

Calculation of annualised capital expenditure (CAPEX) - Indetermining annualised capital expenditure it is important toadhere to the following rules:• Depreciation of adaptation and equipment, IT infrastructureand hardware, etc. should be included in the Total OccupancyCost calculation for both rented and owned buildings to reflectboth historic investment in buildings and ongoing capitalinvestment.

• The depreciation charge included in the Total Occupancy Costcalculation should correspond with the occupier’s depreciationpolicies and the depreciation charge for adaptation andequipment, IT infrastructure and hardware, etc. included in itsstatutory accounts.

• On some occasions, the capital expenditure on adaptation andequipment, IT infrastructure and hardware, etc. on the balancesheet may cover multiple buildings. On these occasions, thedepreciation charge will need to be allocated to specificbuildings; the basis of allocation will vary on a case by casebasis reflecting the nature of the works done.

• For all occupiers who have no clear depreciation policies,recommended depreciation periods are provided throughoutChapter 3.

Calculation of rent for owned buildings - Whilst there may beno cash cost directly associated with owned properties, such asrent and service charges, the cost of capital needs to bereflected.

Most occupier organisations value their owned buildings at leastonce every five years to estimate the open market rental value.This is the preferred basis for calculating a ‘CA1 Net rent’ figurefor owned buildings. Using this approach makes the treatmentfor owned buildings as consistent as possible with that for rentedbuildings.

However, if such valuations do not exist, owners should enter thecost of capital by multiplying the value of the asset as set out inthe financial statement by the organisation’s weighted cost ofcapital to arrive at a notional rent figure. The depreciation chargeincurred in connection with the land and buildings is notconsidered a valid measure of the notional cost of freeholds.

All expenditures and sales taxes - both recoverable andirrecoverable - should be included in determining TotalOccupancy Costs. For benchmarking purposes, however, it isdesirable to review the cost base excluding expenditures orsales taxes. Therefore, it is best practice to be able todistinguish the amount attributable to tax from the direct costinvoiced by a supplier.

Treatment of expenditure tax

2.2 Other principles

Principles to be applied to specific cost categories in the IPDCost Code are explained as follows.

Unitary charge - Consolidated unitary charges are increasinglycommon practice in the real estate and property arena. Thesecharges will often be applied to a total real estate and facilitiesservices package. The following are examples:• Serviced offices where a package of core services is includedin the price (normally paid per workstation), which makes itdifficult to disaggregate the costs

• Property outsourcing where, under a long term contract, abuilding is provided to the occupying organisation. In addition,services may be bundled (like serviced offices) in a totalcontract sum, which makes it impossible to disaggregate thecosts.

Please see Section 6.2 for a further discussion of serviced officesand property outsourcing.

Occasional space - The costs of hiring occasional spaceprocured by the real estate or property management function,which is not considered to be part of the estate, should be enteredunder cost category CA7 Occasional Space. This will include thehiring of meeting spaces as well as corporate ‘touchdown’ dealswhere staff pay as they go. Occasional space costs may either becollected for the estate or country as a whole or be enteredagainst a particular building where this is more appropriate, forexample where overflow space is regularly taken. Where space isnot procured centrally but is independently procured by therelevant business unit or department, these costs should beignored and treated as a general business expense.

Service charges - We recommend breaking down servicecharge costs where possible so that the full costs of the buildingunder each cost category can be properly identified. SeeAppendix A - Reconciliation Guide for a mapping of the IPD CostCode to the RICS Code of Measuring Practice.

Improvement and repair - There may be some confusionbetween improvement on the one hand and repair on the other.A common sense approach is required when deciding whetherlarge items of expenditure should be improvement (the provisionof something new) or repair (putting something back into good oracceptable condition).



Plant and machinery - Costs for plant or machinery as part ofthe core business and/or logistics processes should be excluded.To such costs, in certain circumstances, would inflate the costbase considerably. For example, specialist production plant suchas assembly lines should be excluded whereas a boiler plant thatprovides heating to the building should be included.

Health & Safety - Health and safety is not shown as a separatecost category because it is commonly found as part of manydifferent cost categories. Generally, health and safety associatedto physical works should be entered under cost categories CC3to CC6, whereas the health and safety manager should beentered under cost category CE2 Facilities Management.

2.3 Currency and cost conversion

Currency conversions are important for the consistent calculationof Total Occupancy Costs across a global estate. Therecommended method for dealing with currency is as follows:• Record all costs in local currency.• At the end of each of the organisation’s accounting periodconvert the local currency into the base currency used by theorganisation in its financial statements.

• For the purposes of benchmarking, convert all amountsrecorded in the currency of the financial statement into USdollars and Euros, where this has not already been done.

• Keep a record of the conversion rates used (a currency grid).The currency grid should allow for most types of trend analysisand local country benchmarking.

Conversion rates used should follow the accounting practice ofthe organisation.


In the main chapter of this document, we first present andexplain our conceptual framework for measuring occupancycosts for office buildings. Subsequently, we provide clear andconsistent definitions of the cost measures arising from our

framework. By way of an illustrated example we aim to provideeven more clarity on both the measurement framework and thedefinitions.

3.1 Conceptual framework

In order to compare occupancy costs constructively andconsistently at a global level there is a need for an internationalcost measurement standard.

By aligning the various country specific cost measurementstandards mentioned in section 1.1, we created a global unifyingframework for measuring occupancy costs associated withbuildings. By providing the right amount of granularity, ourframework can be applied at both an international level and thevarious national levels.

The primary cost measures for international comparison andbenchmarking are: Property Occupation Costs, Adaptation andEquipment Costs, Building Operation Costs, Business SupportCosts, Property Management Costs, and Information TechnologyCosts. With each primary measure consisting of a number ofsecondary measures, one can use any of these 41 secondarycost measures for more detailed analysis.

3 Cost Measures

Conceptual framework for measuring occupancy costs

Cost measure Operating costs Capital costs Annual costs

CA Property CAX Net Rent CAY Notional Rent CAZ CAX + CAYOccupation

CB Adaptation and CBX Equipment Hire CBY Furniture and Equipment CBZ CBX + CBYEquipment

CC Building CCX Services Charges CCY Equipment CCZ CCX + CCYOperation

CD Business CDX Catering Costs CDY Kitchen Equipment CDZ CDX + CDYSupport

CE Property CEX Staff Costs CEY Information Systems CEZ CEX + CEYManagement

CF Information CFX Support Costs CFY Computers CFZ CFX + CFYTechnology

Total Occupancy TX AX+BX+CX+DX+EX+FX TY AY+BY+CY+DY+EY+FY TZ TX + TYCosts

3.2 Cost measures

Based on alignment of the various cost measurement standardscurrently in existence in combination with feedback from wellover 100 industry organisations and government bodies, wepropose the following primary cost measures:• Heading CA: Property Occupation Costs (POC)• Heading CB: Adaptation and Equipment Costs (AEC)• Heading CC: Building Operation Costs (BOC)• Heading CD: Business Support Costs (BSC)• Heading CE: Property Management Costs (PMC)• Heading CF: Information Technology Costs (ITC)

Heading CA: Property Occupation Costs (POC)This category includes the total costs of rent, unitary charge,acquisition, disposal and removal, local property taxes, parkingcharges, associated facilities, occasional space as well asmarketing and promotion.• Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

• Property occupation costs should include the full direct cost oflabour employed (including line managers) as well as the costsof equipment, materials and external charges.

• All staff costs should be included, incorporating employmentand labour tax, pensions, allowances, annual bonuses,overtime, temporary staff fill-in, training, recruitment, travel,welfare, administrative, equipment and other costs.

Category Definition

CA1 Net Rent The annual operating expenditure of renting a building or the annualised capital expenditure associated with occupying an owned building.

Organisations should record a figure for rent under at least one of the following headings:• CA1a Rent paid: The actual current annual rent paid to the building owner. This should be recorded for all rentedor leased buildings.

• CA1b Rental value: The current annual open market rental value assessed in the context of local contract terms,review periods, escalation, indexation and other conditions. It is highly desirable to collect this figure especiallywhere there is a significant difference from A1a Rent Paid or A1c Notional Rent, for example, where the buildingis held under a long lease and is not rack-rented.

• CA1c Notional rent: The annual accounting charge calculated by multiplying the value of the asset as set out inthe financial statement by the organisation’s weighted cost of capital. With potential differences in weighted costof capital, occupiers should always record the basis of calculation for notional rent.

Note: When collecting rental figures for benchmarking, the type of rental figure used will need to be carefullyconsidered. It will normally be desirable to use either A1a Rent paid or A1b Rental value. This will allow occupiers tounderstand their opportunity costs of occupation, an important consideration in creating and assessing the realestates and facilities strategy. Furthermore, rental income should be subtracted from rental expenditure.

CA2 Unitary The annual operating expenditure of a total real estate and facilities services package, serviced office, etc. on the Charge basis that it is not possible to identify these items separately.

This excludes the costs of all separately charged extra services such food, drinks and snacks (see CD2), receptionservices (see CD3), reprographics (see CD6), and annual periodic usage and service charges associated withinfrastructure (see CF1) and hardware (see CF2)

Note: Unitary charges generally apply to space that is held continuously for a period of more than one month.Charges for space held intermittently or for a period of less than a month should be included under occasionalspace (see CA7).

CA3 Acquisition, The annual operating expenditure associated with the acquisition, disposal and removal of the building, particularlyDisposal and national and local acquisition taxes and duties (for example taxes levied on rent). Removal

This includes the costs of acquisition taxes and duties as well as disposal costs and removal costs, but excludes the costs of professional, agency and brokerage fees associated with acquisitions (see CE1).



Heading CB: Adaptation and Equipment Costs (AEC)This category includes the total costs of fit out and improvementas well as furniture and equipment.• Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

• Adaptation and equipment costs should include the full directcost of labour employed (including line managers) as well asthe costs of equipment, materials and external charges.


Category Definition

CA4 Local The annual operating expenditure of the building, occupational and environmental tax liability arising under national Property Taxes and local laws and regulations within the subject country, state and municipality. All rebates should be averaged out

across the period to which the rebate relates.

This includes the costs of any taxes or rates arising directly from the occupation of the building and levied on thebuilding itself or upon the occupiers of the building, but excludes the costs of all business and sales taxes that arelevied on business profits and sales as distinct from the occupation of the building.

CA5 Parking The annual operating expenditure of rent or licence fee paid for parking provision together with any local building Charges tax charged on any on-site or off-site car parking associated with the building, whether part of the overall lease

agreement or paid separately.

CA6 Associated The annual operating expenditure of rent or licence fee paid for associated facilities together with any local real Facilities estate/facilities tax charged on any on-site or off-site leisure, storage or any other ancillary facility directly associated

with the building, whether part of the overall lease agreement or paid separately.

This excludes the costs or archiving (see CD9)

CA7 Occasional The annual operating expenditure of charges for occasionally-used space, which is not managed as part of the Space end-user’s estate, aggregated over the year. Such space is typically held either for very short periods of less than a

month or intermittently (for example, every Tuesday evening).

CA8 Marketing The annual operating expenditure of marketing, promotion and any other costs transferred by a landlord to a tenantand Promotion as a result of the occupation of the building on the basis that it is not recorded under any other cost category.

This includes the costs imposed by landlords for a tenant’s share of a property’s general marketing and promotioncosts as well as any other similar costs.

Note: Common use of this category is found in shopping centres and similar buildings where tenants agree to payfor part of the costs of promoting the shopping centre.

Category Definition

CB1 Fit out and The annualised capital expenditure associated with fit out and improvement of the building. Recommended write offImprovement period: 7 years.

This includes the costs of air conditioning, space heating, electrical installations, partitioning, internal walls,woodwork and joinery, wall linings, fixtures, fittings, lighting, flooring, carpeting, tiling, suspended ceilings andsignage, but excludes the costs of physical extensions to the building (see CA1), excludes M&E repair andmaintenance (see CC4) and security equipment and materials (see CC9).

Note: For retail and/or branch buildings, shop fronts, storage racks, etc. are also included.

CB2 Furniture The annualised capital expenditure associated with furniture and equipment in the building. Recommended write offand Equipment period: 5 years.

This includes the costs of desks, chairs, pedestals, desk lights, filing cabinets, storage cabinets, shelving, tables,soft furnishings, works of art, blinds, curtains, drapes, mechanical handling equipment and fire extinguishers.


Heading CC: Building Operation Costs (BOC)This category includes the total costs of consolidated servicescharge, insurance, internal repair and maintenance, M&E repairand maintenance, external and structural repair andmaintenance, minor improvements, internal moves,reinstatement, security, cleaning, waste disposal, internal plantsand decorations, grounds maintenance, water and sewerage aswell as energy.

•� Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

•� Building operation costs should include the full direct cost oflabour employed (including line managers) as well as the costsof equipment, materials and external charges.

•� All staff costs should be included, incorporating employmentand labour tax, pensions, allowances, annual bonuses,overtime, temporary staff fill-in, training, recruitment, travel,welfare, administrative, equipment and other costs.

Category Definition

CC1 Consolidated The annual operating expenditure transferred to the building owner for the delivery of building operation services onServices Charge the basis that it is not possible to identify these items separately.

This includes the costs of insurance, internal repair and maintenance, M&E repair and maintenance, external andstructural repair and maintenance, minor improvements, internal moves, reinstatement, security, cleaning, wastedisposal, internal plants and decorations, grounds maintenance, water and sewerage, and energy.

Note: Services charge revenue should be subtracted from services charge expenditure.

CC2 Insurance The annual operating expenditure of premiums for insuring the building.

This includes the costs of all building related insurance, liability for excess and any premiums for loss of rent,subsidence, terrorism, fires, floods, burst pipes, explosions, and earthquakes, but excludes the costs of insurancefor loss of trade, public liability, damage to or theft of computers, but excludes disaster recovery (see CD7).

Note: Occupiers who self-insure should include an agreed internal risk charge, unless the full costs of any event areborne directly by the occupier under another cost category.

This category may be subdivided into sub-categories:• CC2a Buildings insurance• CC2b Contents insurance• CC2c Engineering insurance• CC2d Terrorism insurance

CC3 Internal The annual operating expenditure on internal repair and maintenance for the building. Recommended write off Repair and period for equipment: 5 years.Maintenance

This includes the costs of regular redecoration and repair and maintenance of fit out, furniture, and equipment as well as contactor costs and the full costs of employment, special equipment, materials and other associated costs,but excludes the costs of M&E repair and maintenance (see CC4), minor improvements (see CC6), internal moves(see CC7) and reinstatement (see CC8).

CC4 M&E Repair The annual operating expenditure associated with repair and maintenance of all mechanical and electrical andMaintenance equipment in the building. Recommended write off period for equipment: 7 years.

This includes repair and maintenance to lifts, escalators, water and plumbing, sprinkler systems, and fire servicesas well as repair and maintenance of air conditioning and electrical installations as well as contactor costs and thefull costs of employment, special equipment, materials and other associated costs, but excludes the costs of fit outand improvement (see CB1) and security equipment and materials (see CC9) as well as any costs related tomanufacturing or business processes.

This category may be subdivided into sub-categories:• CC4a M&E services• CC4b Lifts and escalators• CC4c Suspended access equipment• CC4d Other M&E costs


Category Definition

CC5 External and The annual operating expenditure associated with repair and maintenance of the exterior and the structure of the Structural Repair building. Recommended write off period for equipment: 10 years.and Maintenance

This includes the costs of repairs and maintenance to roofs, external walls, cladding, fenestration, foundations, and drainage as well as external redecoration and external finishes as well as contactor costs and the full costs ofemployment, special equipment, materials and other associated costs, but excludes the costs of suspended access equipment (see CC4).

This category may be subdivided into sub-categories:• CC5a Planned external and structural maintenance• CC5b Unplanned external and structural repair

CC6 Minor The annual operating expenditure on minor improvements (i.e. expenditures less than £10,000) to the building.Improvements

This includes the costs of contactor costs and the full costs of employment, special equipment, materials and otherassociated costs, but excludes the costs of internal moves (see CC7).

CC7 Internal The annual operating expenditure associated with space reorganisation in the building.Moves

This includes the costs of redecoration as well as the costs of moving fit out, furniture, and equipment as well ascontactor costs and the full costs of employment, special equipment, materials and other associated costs, butexcludes the costs of external moves (see CA3).

CC8 Reinstatement The annual operating expenditure or annualised capital expenditure associated with the anticipated liability for dilapidation and reinstatement at the endof the lease contract of the building.

This includes the costs of reinstatement through a sinking fund, replacement fund, reserve fund or depreciation fund imposed on a tenant by a landlord.

CC9 Security The annual operating expenditure of securing the building. Recommended write off period for equipment: 5 years.

This includes the costs of access control systems, readers and passes, identity cards and badges, CCTV, detectors,alarms, lighting and central control, fences, intruder detection systems and loudspeakers, vehicular access control androad blocks as well as contactor costs and the full costs of employment, special equipment, materials and otherassociated costs.

CC10 Cleaning The annual operating expenditure of cleaning the building. Recommended write off period for equipment: 3 years.

This includes the costs of cleaning desks, chairs and pedestals, floors, carpets and tiles, partitions, internal walls anddoors, suspended ceilings and lighting, IT equipment and telephones, WCs, toilets and urinals, pest control and windowcleaning as well as contactor costs and the full costs of employment, special equipment, materials and other associatedcosts.

This category may be subdivided into sub-categories:• CC10a Interior cleaning• CC10b Exterior cleaning


Category Definition

CC11 Waste The annual operating expenditure of waste disposal from the building. Recommended write off period for equipment:Disposal 5 years.

This includes the costs of removing general waste, confidential waste, recycled waste, sanitary waste, toxic waste andcomposted waste as well as contactor costs and the full costs of employment, special equipment, materials and otherassociated costs.

This category may be subdivided into sub-categories:• CC11a General waste disposal• CC11b Toxic waste disposal (hazardous and radioactive)• CC11c Confidential waste disposal• CC11d Sanitary waste disposal• CC11e Recycled waste disposal (plastic, metal, paper, glass, wood, cartridges, batteries)• CC11f Composted waste disposal

CC12 Internal The annual operating expenditure of plants and decoration in the building. Recommended write off period for Plants and equipment: 3 years.Decorations

This includes the costs of watering, feeding and pruning of plants and flowers, provision of decoration for festivals suchas Christmas, and cleaning and dusting of internal plants and decorations as well as contactor costs and the full costsof employment, special equipment, materials and other associated costs.

CC13 Grounds The annual operating expenditure of grounds maintenance around the building. Recommended write off period forMaintenance equipment: 3 years.

This includes the costs of maintaining lawns, borders and window boxes, parking areas, roadways and pavements,greenhouses, pavilions and garden stores, litter clearance and snow clearance as well as contactor costs and the fullcosts of employment, special equipment, materials and other associated costs.

This category may be subdivided into sub-categories:• CC13a Hard landscaping• CC13b Soft landscaping• CC13c Litter and snow clearance

CC14 Water and The annual operating expenditure of water supply and sewerage for the building.Sewerage

This includes the costs of water supply and sewerage, but excludes the costs of fit out and improvement (see CB1) andM&E repair and maintenance (see CC4) of water facilities.

This category may be subdivided into sub-categories:• CC14a Water supply• CC14b Sewerage

CC15 Energy The annual operating expenditure of energy supply to the building.

This includes the costs of electricity, gas, fuel, district heating and all other energy, but excludes the costs of fit out andimprovement (see CB1) and M&E repair and maintenance (see CC4) of energy facilities.

This category may be subdivided into sub-categories:• CC15a Electricity• CC15b Gas• CC15c Fuel / oil• CC15d District heating• CC15e Other energy


Heading CD: Business Support Costs (BSC)This category includes the total costs of catering, receptionservices, courier and external distribution services, post roomand internal distribution services, reprographics, disasterrecovery, transport as well as archiving•� Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

•� Business support costs should include the full direct cost oflabour employed (including line managers) as well as the costsof equipment, materials and external charges.


Category Definition

CD2 Catering The annual operating expenditure on catering associated with the building. Recommended write off period for equipment: 5 years.

This includes the costs of food, drinks and snacks, catering equipment and kitchen equipment, crockery and cutlery,and subsidy and vouchers as well as contactor costs and the full costs of employment, special equipment, materialsand other associated costs, but excludes the costs of fit out (see CB1), cleaning (see CC10) and energy (see CC15).

Note: Catering revenue should be subtracted from catering expenditure.

This category may be subdivided into sub-categories:• CD2a General catering costs • CD2b Vending machine costs• CD2c Meeting room hospitality

CD3 Reception The annual operating expenditure on reception services associated with the building. Recommended write off Services period for equipment: 5 years.

This includes the costs of uniforms as well as contactor costs and the full costs of employment, special equipment,materials and other associated costs, but excludes the costs of fit out costs (see CB1), furniture (see CB2), security (seeCC9) and hardware (see CF2).

CD4 Courier and The annual operating expenditure on courier and external distribution services associated with the building. External Distribution Recommended write off period for equipment: 5 years.Services

This includes contactor costs and the full costs of employment, special equipment, materials and other associatedcosts, but excludes the costs of internal distribution (see CC5).

CD5 Post Room The annual operating expenditure on post room and internal distribution services associated with the building. and Internal Recommended write off period for equipment: 3 years.Distribution

This includes the costs of distribution and collection of mail, opening and packaging mail, stamping, recording and Servicesdespatching mail as well as contactor costs and the full costs of employment, special equipment, materials and otherassociated costs, but excludes the costs of internal distribution (see CC4).

This category may be subdivided into sub-categories:• CD5a Post room services• CD5b Distribution services

CD6 Reprographics The annual operating expenditure on reprographics associated with the building. Recommended write off period for equipment: 3 years.

This includes printers and photocopiers as well contactor costs and the full costs of employment, special equipment,materials and other associated costs, but excludes the costs of consumables such as paper.

This category may be subdivided into sub-categories:• CD6a Central reprographics• CD6b Distributed reprographics


Category Definition

CD7 Disaster The annual operating expenditure on alternative premises and related equipment for the building. Recommended writeRecovery off period for equipment: depending on the type of expenditure.

This includes the costs of directly holding contingency buildings, or leasing arrangements for access to contingencyspace (e.g. with serviced office providers).

CD8 Transport The annual operating expenditure on transport to and from the building. Recommended write off period for equipment:3 years.

This includes the costs of bus schemes and transport subsidy as well contactor costs and the full costs of employment,special equipment, materials and other associated costs, but excludes the costs of vehicles provided for the exclusivepersonal use of members of staff, taxi costs, and car fleet management.

CD9 Archiving The annual operating expenditure on archiving associated with the building. Recommended write off period for equipment: depending on the type of expenditure.

This includes archiving systems and retrieval systems as well as contactor costs and the full costs of employment,special equipment, materials and other associated costs, but excludes the costs of storage cabinets (see CB2).

This category may be subdivided into sub-categories:• CD9a On-site archiving• CD9b Off-site archiving

Category Definition

CE1 Real Estate The annual operating expenditure on real estate management of all activities associated with property occupation (seeManagement CA). Recommended write off period for equipment: 3 years.

This includes the costs of strategic planning and reporting, valuations, acquisitions and disposals, contract negotiationsand real estate charges as well contactor costs and the full costs of employment, special equipment, materials andother associated costs, but excludes the costs of facilities management (see CE2), project management (see CE3) andother management (see CE4).

This category may be subdivided into sub-categories:• CE1a In-house real estate management• CE1b Outsourced real estate management

Heading CE: Property Management Costs (PMC)This category includes the total costs of real estate management,facilities management, project management as well as othermanagement•� Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

•� Property management costs should include the full direct costof labour employed (including line managers) as well as thecosts of equipment, materials and external charges.



Category Definition

CE2 Facilities The annual operating expenditure on day to day facilities management of all activities associated with adaptation and Management equipment (see CB), building operation (see CC) and business support (see CD). Recommended write off period for

equipment: 3 years.

This includes the costs of workplace management, design and layout, health and safety, helpdesk, concierge services,condition surveys as well as contactor costs and the full costs of employment, special equipment, materials and otherassociated costs, but excludes the costs of real estate management (see CE1), project management (see CE3) andother management (see CE4).

This category may be subdivided into sub-categories:• CE2a In-house facilities management• CE2b Outsourced facilities management

CE3 Project The annual operating expenditure on intended project management of all activities associated with adaptation andManagement equipment (see CB), building operation (see CC) and business support (see CD). Recommended write off period for

equipment: 3 years.

This includes the costs of project management as well as contactor costs and the full costs of employment, specialequipment, materials and other associated costs, but excludes the costs of real estate management (see CE1), facilitiesmanagement (see CE2) and other management (see CE4).

This category may be subdivided into sub-categories:• CE3a In-house project management• CE3b Outsourced project management

CE4 Other The annual operating expenditure of other management associated with the building. Recommended write off period forManagement equipment: 3 years

This includes the costs of environmental management, information management and quality management as well as contactor costs and the full costs of employment, special equipment, materials and other associated costs, but excludes the costs of real estate management (see CE1), facilities management (see CE2) and project management (see CE3).

This category may be subdivided into sub-categories:• CE4a Environmental management• CE4b Information management• CE4c Quality management


Category Definition

CF1 Infrastructure The annualised capital expenditure of infrastructure associated with information and communication technology in the building. Recommended write off period: 5 years.

This includes the costs of hardwired cables and wires as well as wireless components and the annual costs of periodicusage and service charges.

May be subdivided into sub-categories:• CF1a External infrastructure• CF1b Internal infrastructure

CF2 Hardware The annualised capital expenditure of hardware associated with information and communication technology in thebuilding. Recommended write off period: 3 years.

This includes the costs of desktop phones, mobile phones, blackberries, MDAs as well as PCs, laptops and both on-site and off-site servers and the annual periodic usage and service charges.

May be subdivided into sub-categories:• CF2a Telecommunication• CF2b Computers

CF3 Software The annual operating expenditure on software associated with information and communication technology.

This includes the costs of operating systems and user software, but excludes alarm software (see CC9) and propertymanagement software (see CE1, CE2 or CE3).

May be subdivided into sub-categories:• CF3a Operating systems• CF3b User software

CF4 Support The annual operating expenditure on management of all activities associated with infrastructure (see CF1), hardware (see CF1) and software (see CF3). Recommended write off period for equipment: 3 years.

This includes the full cost of employment for directly employed staff as well as contractor costs, special equipment,materials and other associated costs.

May be subdivided into sub-categories:• CF4a Internal support staff• CF4b Outsourced support staff

Heading CF: Information Technology Costs (ITC)This category includes the total costs of infrastructure, hardware,software as well as support• Annualised capital expenditure is calculated by depreciatingany capital costs over a straight line, without any allowance forfinancing costs (see Section 2.1).

• Information Technology costs should include the full direct costof labour employed (including line managers) as well as thecosts of equipment, materials and external charges.


In this chapter we aim to transform data into information bydefining cost ratios that can be used for benchmarking purposes.In addition, we recommend key indicators for reporting purposes.Clarification is provided through a worked example.

4.1 Budgets and targets

Financial budgets and targets lie at the heart of any propertymanagement function and it is good practice to state suchbudgets and targets for each individual building so thatmanagement expectations are clear and concise.

Creating cost ratio targets for an estate is common practice inmany organisations. The realism of these targets can be testedby examining the related targets for individual buildings within theestate. This goes to emphasise the importance of the effortsmade by all building managers across the organisation towardsthe achievement of the overall estate-level target.

As for cost ratios, we recommend using per FTE figures.Although expressing cost ratios on a per square metre or perworkstation basis may be common practice, FTE figures providea richer and more business-relevant picture. Furthermore, it givesmanagement a clear incentive to move towards high capacityutilisation.

Defining FTE, workstation and square metre

4.2 Cost ratios

By combing our conceptual framework with all cost measuresdefined, we propose the following cost ratios for costcomparison and benchmarking.

Key corporate ratio - As for the key corporate ratio, one canbest use Total Occupancy Costs as a percentage of totaloperating expenses:•� Total Occupancy Costs / total operating expenses (%)

Primary cost ratios - As for the primary ratios, one can best useTotal Occupancy Costs per employees (i.e. Full Time Equivalent),per workstation (i.e. Usable Floor Area), or per square metre (i.e.Net Internal Area):•� Total Occupancy Costs per FTE (£)•� Total Occupancy Costs per workstation (£)•� Total Occupancy Costs per square metre NIA (£)

4 Ratios and Worked Example


The number of personnel is calculated in terms of full-time equivalents. Non-payroll staff, such as staff consultants, contractors, andother outsourced staff, is converted to full-time equivalents on the following basis:• Personnel working > 32 hours per week on a regular basis = 1.0 FTE• Personnel working 24- 32 hours per week on a regular basis = 0.8 FTE• Personnel working 16-24 hours per week on a regular basis = 0.6 FTE• Personnel working 8-16 hours per week on a regular basis = 0.4 FTE• Personnel working < 8 hours per week on a regular basis = 0.2 FTE

The number of designated workstations within the building should include both occupied and vacant positions but exclude anywithin designated meeting rooms or areas. A workstation should have the capacity to act as a satisfactory place of work for oneemployee, contractor or visitor.

The number of square metres within the building can be expressed as Net Internal Area (NIA is the usable area within a buildingmeasured to the internal face of the perimeter walls at each floor level) or following the IPD Space Code, as Usable Floor Area (UFAis the floor area corresponding to the support of all organisational processes).

For manufacturing and retail buildings, Total Occupancy Costs per workstation is a less appropriate denominator. Here TotalOccupancy Costs over the value of the goods produced and/or sold is commonly used and more appropriate.

Secondary cost ratios - As for the secondary ratios, one canuse any of the six secondary cost measures per employee (i.e.Full Time Equivalent), per workstation (i.e. Work Floor Area), orper square metre (i.e. Net Internal Area or Usable Floor Area):•� Property Occupation Costs per FTE (or workstation or m2 NIAor UFA)

• Adaptation and Equipment Costs per FTE (or workstation orm2 NIA or UFA)

•� Building Operation Costs per FTE (or workstation or m2 NIA orUFA)

•� Business Support Costs per FTE (or workstation or m2 NIA orUFA)

•� Property Management Costs per FTE (or workstation or m2

NIA or UFA)•� Information Technology Costs per FTE (or workstation or m2

NIA or UFA)

Tertiary cost ratios - As for the tertiary ratios, one can use anyof the 41 tertiary cost measures per employee (i.e. Full TimeEquivalent), per workstation (i.e. Usable Floor Area), or persquare metre (i.e. Net Internal Area or Usable Floor Area), suchas:•� Rent costs per FTE (or workstation or m2 NIA or UFA)•� Furniture and Equipment costs per FTE (or workstation or m2

NIA or UFA)•� Internal Repair and Maintenance costs per FTE (orworkstation or m2 NIA or UFA)

•� Reception Services costs per FTE (or workstation or m2 NIA orUFA)

•� Facilities Management costs per FTE (or workstation or m2

NIA or UFA)•� Infrastructure costs per FTE (or workstation or m2 NIA or UFA)

4.3 Worked example

The worked example in this section is based on the portfolio for acompany with 67 office building throughout the UK. The total NetInternal Area for the entire portfolio is 94,990 m2, comprises8,088 workstations and accommodates a total of 7,353 FTEstaff. The costs quoted are based on the Cost Code’scategorisation of expenditure and are derived from the 2009 IPDOccupiers Database.

Key corporate ratio and primary cost ratios - Looking at thekey corporate ratio, it is instantly clear that 8.94% or totaloperating expenses is tied up in Total Occupancy Costs, but alsothat this is 2.07% lower when compared to other insurancecompanies. Looking at the primary cost ratios, one can see thatTotal Occupancy Costs per workstation (at £7,703) is almost 5%more expensive when compared with the sector benchmark.With similar-to-sector Total Occupancy Costs per square metreNIA, but significantly better desk utilisation ratios, however, TotalOccupancy Costs per FTE (at £8,037) is almost 8% cheaperwhen compared with the sector benchmark.

As for the key corporate ratio, the target is to reduce TotalOccupancy Costs as a percentage of total operating expensesdown to 8.75%. This means that the company is currently 2.2%off target. This target is to be achieved by reducing the space perworkstation from 11.74 m2 to 11 m2 whilst increasing the densityfrom 1.1 desk per FTE to 1.05 desk per FTE. By doing so, spaceper FTE will come down from 12.9 m2 to 11.6 m2. As a result, theTotal Occupancy Costs per workstation can come down from£7,307 to £7,040 (currently 3.8% off target) and the TotalOccupancy Costs per FTE can come down from £8,037 to£7,392 (currently 8.7% off target). Through more intensive use ofthe space occupied, however, the cost per m2 will go up, but hasbeen capped at a maximum of £640.


Current Sector Difference Prospective Difference figure benchmark from benchmark target from target

Key corporate ratioTotal Occupancy Costs / Total Operating Expenses 8.94% 9.12% -2.07% 8.75% 2.2%

Primary cost ratiosTotal Occupancy Costs per FTE £8,037 £8,721 -7.84% £7,392 8.72%Total Occupancy Costs per workstation £7,307 £6,977 4.73% £7,040 3.79%Total Occupancy Costs per m2 NIA £622 £638 -2.48% £640 -2.79%

Key corporate ratio and primary cost ratios

Secondary costs ratios - Looking at the secondary cost ratios,a similar pattern emerges in which costs per workstation arehigher than the sector benchmark for four out of six measures,but in which costs per FTE are lower than the sector benchmarkfor five out of six measures. Again this is mainly caused bysignificantly better desk utilisation ratios at the insurancecompany investigated.

Tertiary costs ratios - Looking at the tertiary cost ratios, onecan easily identify key areas for potential cost savings. Looking at‘share of total costs’, the most logical areas to focus cost savingefforts are: 1) net rent, 2) hardware costs, and 3) rates. Lookingat ‘difference from benchmark’, the most logic areas to focuscost saving efforts are: 1) parking costs, 2) external distributioncosts, and 3) acquisition, disposal and removal costs. Combiningthe two, however, the most logical areas to focus cost savingefforts are: 1) external distribution costs, 2) internal repair andmaintenance, and 3) software costs.

It should be noted that reducing space usage (i.e. less space perworkstation and/or improved desk utilisation ratios) whilstkeeping costs per square metre at current levels, may lead tohigher costs savings when compared to simply reducing costsper square metre in any of the cost categories identified above.


Current Sector Difference Prospective Difference figure benchmark from benchmark target from target

Secondary cost ratios per FTEProperty Occupation Costs £3,212 £3,542 -9.34% £2,932 8.70%Adaptation and Equipment Costs £168 £202 -17.09% £152 9.18%Building Operation Costs £1,624 £1,825 -11.05% £1,512 6.87%Business Support Costs £737 £850 -13.28% £677 8.14%Property Management Costs £367 £340 7.97% £340 7.21%Information Technology Costs £1,930 £1,961 -1.59% £1,778 7.88%

Secondary cost ratios per workstationProperty Occupation Costs £2,920 £2,835 2.99% £2,793 4.35%Adaptation and Equipment Costs £152 £162 -5.82% £145 4.86%Building Operation Costs £1,476 £1,461 1.05% £1,440 2.43%Business Support Costs £670 £680 -1.49% £645 3.77%Property Management Costs £333 £272 22.65% £324 2.80%Information Technology Costs £1,755 £1,570 11.79% £1,693 3.50%

Secondary cost ratios per m2 NIAProperty Occupation Costs £248.62 £259.14 -4.06% £253.89 -2.12%Adaptation and Equipment Costs £12.98 £14.79 -12.27% £13.18 -1.58%Building Operation Costs £125.68 £133.52 -5.88% £130.92 -4.17%Business Support Costs £57.06 £62.18 -8.23% £58.62 -2.74%Property Management Costs £28.39 £24.85 14.25% £29.46 -3.78%Information Technology Costs £149.41 £143.48 4.13% £153.94 -3.03%

Secondary cost ratios

Code Category Total cost Share of Portfolio Benchmark Difference Potentialfor portfolio total mean mean from for cost

(£) costs for (£/m2 NIA) (£/m2 NIA) benchmark savings (£)portfolio (%) (%)

CA Property Occupation Costs £23,615,939 40.0% £248.62 £259.14 -4.1% £91,822CA1 Net rent £18,533,974 31.4% £195.12 £197.55 -1.2% NACA2 Unitary charge £0 NA £0.00 £0.66 NA NACA3 Acquisition, disposal and removal costs £20,898 0.0% £0.22 £0.14 57.1% £11,942CA4 Rates (local property taxes) £5,005,498 8.5% £52.70 £60.49 -12.9% NACA5 Parking costs £55,569 0.1% £0.59 £0.24 143.8% £79,881CA6 Associated facilities costs £0 NA £0.00 £0.05 NA NACA7 Occasional space costs £0 NA £0.00 £0.01 NA NACA8 Marketing and promotion costs £0 NA £0.00 £0.00 NA NA

CB Adaptation and Equipment Costs £1,232,495 2.1% £12.98 £14.79 -12.3% £0CB1 Fit out and improvement costs £1,129,431 1.9% £11.89 £13.56 -12.3% NACB2 Furniture and equipment costs £103,064 0.2% £1.09 £1.23 -11.8% NA

CC Building Operation Costs £11,937,868 20.2% £125.68 £133.52 -5.9% £1,200,195CC1 Net service charges £1,838,057 3.1% £19.35 £31.96 -39.5% NACC2 Total insurance costs £345,764 0.6% £3.64 £3.90 -6.7% NACC3 Internal repair and maintenance costs £1,292,814 2.2% £13.61 £9.70 40.3% £521,124CC4 M&E repair and maintenance costs £950,850 1.6% £10.01 £13.55 -26.1% NACC5 External repair and maintenance costs £369,986 0.6% £3.90 £3.34 16.6% £61,480CC6 Minor improvement costs £57,944 0.1% £0.61 £0.49 24.5% £14,190CC7 Internal moves costs £383,760 0.6% £4.04 £3.08 31.2% £119,613CC8 Reinstatement costs £0 NA £0.00 £0.00 NA NACC9 Security costs £1,846,606 3.1% £19.44 £16.73 16.2% £299,121CC10 Cleaning costs £1,472,820 2.5% £15.51 £15.81 -1.9% NACC11 Waste disposal costs £210,878 0.4% £2.22 £1.67 32.9% £69,451CC12 Internal plants and flowers costs £70,293 0.1% £0.74 £0.77 -3.9% NACC13 Grounds maintenance costs £111,138 0.2% £1.17 £0.84 39.3% £43,661CC14 Water and sewerage costs £109,239 0.2% £1.15 £2.12 -45.8% NACC15 Total energy costs £2,877,722 4.9% £30.30 £29.56 2.5% £71,554

CD Business Support Costs £5,420,129 9.2% £57.06 £62.18 -8.2% £981,402CD1 Telephone costs £0 NA £0.00 £0.45 NA NACD2 Catering and vending costs £1,141,780 1.9% £12.02 £17.61 -31.7% NACD3 Reception costs £317,267 0.5% £3.34 £3.29 1.5% £4,822CD4 External distribution costs £1,129,431 1.9% £11.89 £6.69 77.7% £877,884CD5 Internal distribution costs £1,397,303 2.4% £14.71 £15.99 -8.0% NACD6 Reprographics costs £369,511 0.6% £3.89 £3.07 26.7% £98,697CD7 Business continuity costs £0 NA £0.00 £0.00 NA NACD8 Transport costs £0 NA £0.00 £0.00 NA NACD9 Archiving costs £1,064,838 1.8% £11.21 £15.08 -25.7% NA

CE Property Management Costs £2,696,766 4.6% £28.39 £24.85 14.2% £437,184CE1 Real estate management costs £528,144 0.9% £5.56 £5.11 8.8% £46,510CE2 Facilities management costs £1,656,626 2.8% £17.44 £14.68 18.8% £311,464CE3 Project management costs £97,840 0.2% £1.03 £1.40 -26.4% NACE4 Other management costs £414,156 0.7% £4.36 £3.66 19.1% £79,210

CF Information Technology Costs £14,192,456 24.0% £149.41 £143.48 4.1% £1,017,238CF1 Infrastructure costs £3,249,608 5.5% £34.21 £38.04 -10.1% NACF2 Hardware costs £5,189,304 8.8% £54.63 £50.53 8.1% £421,060CF3 Software costs £4,033,275 6.8% £42.46 £37.93 11.9% £481,696CF4 Support costs £1,720,269 2.9% £18.11 £16.98 6.7% £114,482

Total Total Occupancy Costs £59,095,654 100% £622.13 £637.96 -2.5% £3,727,841

Tertiary cost ratios


Property performance trees - Acknowledging that manyorganisations use property performance dashboards and/orproperty performance trees based on company specific costmeasures, the cost categories identified in the IPD Cost Codecan easily be clustered and/or re-attributed into any reportingstructure preferred. In the example below, fixed occupation costsconsist of cost categories CA1 + CA2 + CA4 + CB1 + CB2 +CC1; hard services costs consist of cost categories CA5 + CC2+ CC3 + CC4 + CC5 + CC6 + CC8 + CC14 + CC15 + CD8;soft services costs consist of cost categories CC9 + CC10 +CC11 + CD2 + CD3 + CD4 + CD5 + CD6; propertymanagement costs consist of cost categories CE1 + CE2 + CE3+ CE4; and information technology costs consist of costcategories CF1 + CF2 + CF3 + CF4.

Essential information can instantly be recognised from theproperty performance tree:• Total property costs per FTE occupant currently stand at£7,812 whilst outperforming the sector benchmark by 7%

• Total m2 NIA per FTE occupant stand at £12.9 whilstoutperforming the sector by 5%

• Total property costs per m2 NIA stand at £604 whilst beingoutperformed by the sector by 2%

Further drilling down into total property costs per m2 NIA, onecan see that:• Fixed property costs per m2 NIA stand at £280 whilstoutperforming the sector benchmark by 8%. Further drillingdown highlights that rent, rates, adaptation and equipment,and net service charges are all cheaper when compared to thesector benchmark.

• Hard services costs per m2 NIA stand at £64 whilst beingoutperformed by the sector by 1%. Further drilling downhighlights that parking, internal repair and maintenance,external repair and maintenance, minor improvements, andtotal energy are all more expensive than the sector benchmark,but also that total insurance, M&E repair and maintenance, andwater and sewerage are all cheaper when compared to thebenchmark.

• Soft services costs per m2 NIA stand at £83 whilst beingoutperformed by the sector benchmark by 3%. Further drillingdown highlights that security, waste disposal, reception,external distribution, and reprographics are all more expensivethan the sector benchmark, but also that cleaning, cateringand vending, and internal distribution are all cheaper whencompared to the benchmark.

• Property management costs per m2 NIA stand at £28 whilstbeing outperformed by the sector by 15%. Further drillingdown highlights that real estate management, facilitiesmanagement, and other management are all more expensivethan the sector benchmark, but also that project managementis cheaper when compared to the benchmark.

• Information technology costs per m2 NIA stand at £149 whilstbeing outperformed by the sector benchmark by 4%. Furtherdrilling down highlights that hardware, software, and supportare all more expensive than the sector benchmark, but alsothat infrastructure is cheaper when compared to thebenchmark.

Further drilling down into total m2 NIA per FTE occupant, one cansee that:• Total m2 NIA per workstation stands at 11.7 m2 whilst beingoutperformed by the sector benchmark by 7%.

• Workstation provision ratio per FTE stands at 1.1 whilstoutperforming the sector benchmark by 12%.


Total property costsper m2 NIA

Total fixedoccupation costs

per m2 NIATotal hard servicescosts per m2 NIA

Total propertymanagement costs

per m2 NIA

Total soft servicescosts per m2 NIA

Total informationtechnology costs

per m2 NIA

102 £605

108 £280 99 £64 97 £83

85 £28 96 £149

Total propertycosts per FTE

occupant107 £7812

Total m2 NIA perFTE occupant

Workstationprovision ratio per

FTETotal m2 NIA per

workstation

105 12.9 m2 112 1.1093 11.7 m2

Property performance tree with monetary values and sectorbenchmarks

5 Applying the Code


In this chapter we explain how you can apply the Cost Code ineveryday practice. To guarantee accurate comparisons betweenorganisations and/or buildings, contextual data needs to becollected as well as cost data. For a complete overview on howto apply the IPD Cost Code, please consult Appendix C -Measurement Template.

5.1 Assessing cost performance

The key purpose of using the IPD Cost Code is to measure,analyse and report occupancy costs and subsequent costperformance of buildings and/or portfolios. Once cost data, alongwith contextual data, has been assembled it will be possible toconvert it into cost ratios that will help to:• Gain clarity on occupancy costs of the buildings we use andoccupy

• Create cost performance targets and track progress over time• Support effective decision-making on expenditure and costallocation

• Accurately and confidently communicate financialimprovements

• Enable benchmarking against other organisations

With a robust dataset for a building and/or a portfolio in place,benchmarking can be used to compare cost performanceagainst an appropriate peer group of similar occupierorganisations and/or against other buildings within a portfolio.Based on the outcome of this comparison exercise, one canidentify low performance buildings, set realistic cost performancetargets, and ultimately make informed decisions.

5.2 Data collection

Objective comparisons and subsequent realistic targets and trulyinformed decisions can only be made when spatial data is put incontext. Therefore it is important to collect contextual data on theproperty itself, its users and the workstations. For more details,please see Appendix C - Measurement Template.

1 - Property

1A - Office address1B - Industry sector1C - Building type1D - Building location1E - Building condition

2 - Users

2A - Employees2B - Contractors2C - Visitors

3 - Workstations

3A - Open workstations3B - Semi-open workstations3C - Enclosed workstations

4 - Core operating hours

Collecting contextual data


In addition, it is advisable to collect core spatial andenvironmental data to provide a more balanced view of propertyperformance. For more information on how to exactly collect thisdata, please feel free to download complimentary copies of theIPD Space Code and the IPD Environment Code fromwww.ipdoccupiers.com.

With consistent collection of cost data being the key purpose ofthe IPD Cost Code, a clear set of cost components is needed.Providing both the right amount of granularity to allow cross-border comparisons, and sufficient detail to suit occupier needs,we developed the following fields for the collection of cost data.For more details, please see Appendix C - MeasurementTemplate.

CA - Property Occupation Costs

CA1 - Net RentCA1a - Rent paidCA1b - Rental valueCA1c - Notional rent

CA2 - Unitary ChargeCA3 - Acquisition, Disposal and RemovalCA4 - Local Property TaxesCA5 - Parking ChargesCA6 - Associated FacilitiesCA7 - Occasional SpaceCA8 - Marketing and Promotion

CB - Adaptation and Equipment Costs

CB1 - Fit out and ImprovementCB2 - Furniture and Equipment

CC - Building Operation Costs

CC1 - Consolidated Services ChargeCC2 - InsuranceCC2a - Buildings insuranceCC2b - Contents insuranceCC2c - Engineering insuranceCC2d - Terrorism insurance

CC3 - Internal Repair and MaintenanceCC4 - M&E Repair and MaintenanceCC4a - M&E servicesCC4b - Lifts and escalatorsCC4c - Suspended access equipmentCC4d - Other M&E costs

CC5 - External and Structural Repair and MaintenanceCC5a - Planned external and structural maintenanceCC5b - Unplanned external and structural repair

CC6 - Minor ImprovementsCC7 - Internal MovesCC8 - ReinstatementCC9 - SecurityCC10 - CleaningCC10a - Interior cleaningCC10b - Exterior cleaning

CC11 - Waste DisposalCC11a - General waste disposalCC11b - Toxic waste disposal CC11c - Confidential waste disposalCC11d - Confidential waste disposalCC11e - Recycled waste disposalCC11f - Composted waste disposal

CC12 - Internal Plants and DecorationsCC13 - Grounds MaintenanceCC13a - Hard landscapingCC13b - Soft landscapingCC13c - Litter and snow clearance

CC14 - Water and SewerageCC14a - Water supplyCC14b - Sewerage

CC15 - EnergyCC15a - ElectricityCC15b - GasCC15c - Fuel / oilCC15d - District heatingCC15e - Other energy

S - Spatial data E - Environmental data

SA - Total Floor Area EA - Energy ConsumptionSB - Internal Floor Area EB - Water UsageSC - Usable Floor Area EC - Waste ProductionSD - Work Floor Area ED - Transport and TravelSE - Surplus Floor Area EE - Equipment and Appliances

Collecting spatial data and environmental data

S - Spatial data E - Environmental data

SA - Total Floor Area EA - Energy ConsumptionSB - Internal Floor Area EB - Water UsageSC - Usable Floor Area EC - Waste ProductionSD - Work Floor Area ED - Transport and TravelSE - Surplus Floor Area EE - Equipment and Appliances

Collecting spatial data and environmental data

CD - Business Support Costs

CD2 - CateringCD2a - General catering costsCD2b - Vending machine costsCD2c - Meeting room hospitality

CD3 - Reception ServicesCD4 - Courier and External Distribution ServicesCD5 - Post Room and Internal Distribution ServicesCD5a - Post room servicesCD5b - Distribution services

CD6 - ReprographicsCD6a - Central reprographicsCD6b - Distributed reprographics

CD7 - Disaster RecoveryCD8 - TransportCD9 - ArchivingCD9a - On-site archivingCD9b - Off-site archiving

CE - Property Management Costs

CE1 - Real Estate ManagementCE1a - In-house real estate managementCE1b - Outsourced real estate management

CE2 - Facilities ManagementCE2a - In-house facilities managementCE2b - Outsourced facilities management

CE3 - Project ManagementCE3a - In-house project managementCE3b - Outsourced project management

CE4 - Other ManagementCE4a - Environmental managementCE4b - Information managementCE4c - Quality management

CF - Information Technology Costs

CF1 - InfrastructureCF1a - External infrastructureCF1b - Internal infrastructure

CF2 - HardwareCF2a - TelecommunicationCF2b - Computers

CF3 - SoftwareCF3a - Operating systemsCF3b - User software

CF4 - SupportCF4a - Internal support staffCF4b - External support staff

Collecting cost data

With both contextual data and cost data collected, you cancreate the appropriate ratios and indicators as explained in theprevious chapter. Recommendations to improve costperformance over time can be found in the next chapter.

5.3 Case studies

Below, three case studies highlight how application of the IPDCost Code benefits various organisations.

OFFICE OF GOVERNMENT COMMERCEThe Office of Government Commerce (OGC) is an independentoffice of HM Treasury, established to help Government deliverbest value from its spending. The OGC works with GovernmentDepartments, their Executive Agencies and other arms lengthbodies to ensure best value from the Government's central CivilEstate through stronger performance management andguidance.

OGC provides policy standards and guidance on best practice inprocurement, projects and strategic estate management, andmonitors and challenges Government Departments' performanceagainst these standards, grounded in an evidence base ofinformation and assurance. It also works to reduce any negativeenvironmental impacts that arise from the estate or the use of it.

Total Occupancy Costs and targetsFor the Financial Year 2007/08, the total annual costs associatedwith running the central civil estate is estimated at £3.5bn perannum. The Government has set an ambitious target of achievingbetween £1bn and £1.5bn of savings by 2013 from its running ofthe Civil Estate. A key component in delivering this is the HighPerforming Property (HPP) strategy launched in 2006, whichensures efficient management of property assets is championedat board-level in Government Departments and becomes anintegral part of business planning and delivery. OGC’sbenchmarking, mapping and database tools supportdepartments in making strategic property planning decisions andin managing their estate efficiently. With the IPD Cost Code at theheart of their electronic Property Information Mapping Service(ePIMS), the Cost Code plays a crucial role in achieving thetargets set.

Roadmap to asset management excellenceThe HPP initiative is a major change programme that challengesGovernment to bring about a significantly smaller, more sustainableand agile central civil estate creating value for the citizen. UnderHPP, Government accommodation will be acquired on the basis ofwhole-life value to meet the well-defined business needs.


HPP sets out clear and constructive actions and milestones forall departments and agencies:• Stronger leadership and integration• A significant programme of benchmarking• A drive to strengthen skills and capability• Increased powers of review and challenge

It is in establishing ‘a significant programme of benchmarking’where the IPD Cost Code has played and will continue to play amajor role. Providing a comprehensive framework with cleardefinitions and constructive benchmarks, the Cost Code sits atthe heart of the Government’s electronic Property InformationMapping Service (ePIMS).

Role of the IPD Cost CodeThe IPD Cost Code sets out an internationally acknowledgedframework for property cost categorisation with clear definitionsto provide the consistency essential to effective internal andexternal benchmarking. This consistency coupled with anemphasis on the value of data in effective management hasenabled reliable and like for like comparison between and acrossbuildings and estates in the civil estate.

Gathering and structuring clearly defined cost data has:• Promoted and facilitated knowledge exchange between centralgovernment departments and the arms length bodies theysponsor;

• Supported the communication of cost data and informationthrough credible and trusted reporting;

• Increased the value and potential of data through its effectiveuse in property benchmarking.

Property Information Mapping ServiceEfficient management across the Civil Estate is dependent on theavailability of accurate and up-to-date information and the abilityto interpret and use it effectively. To support the central rolewhich information plays in understanding and shaping the futureGovernment estate, common standards and definitions areessential. The IPD Cost Code has been adopted andimplemented as the basis for OGC cost categorisation andprovides a robust foundation for defining data elements on theGovernment’s electronic Property Information Mapping Service(ePIMS).

OGC has developed and managed ePIMS as the Government’scentral property information database. Since 2005 its use hasbeen a mandatory for all departments and their executiveagencies and other arm's length bodies. The system has beenprogressively developed so that today ePIMS supports andprovides a centralised reporting database with a comprehensivedataset covering of all central Government property holdings.

The added value of benchmarkingPrompted by the significant scope for property to be used moreefficiently and effectively by central government, OGCimplemented a pathfinder property benchmarking service in2005. Property benchmarking has since become pivotal toOGC’s efforts to support Government departments in deliveringbest value from the estate.

Using ePIMS as its data platform to support propertybenchmarking, OGC has worked in partnership with IPD todeliver and develop the service the participation in which wasmandated across central Government from April 2008. Both HPPand ePIMS have received international recognition as leadingexemplars of tools to ensure effective management of publicsector real estate.


Ministry of Justice Department for Work and Pensions HM Revenue and Customs Business Innovation & Skills Home Office Ministry of Defence Department for Transport Department for Environment Food and Rural Affairs Department of Health Communities and Local Government Chancellor's Departments (excluding HMRC) Law Officers Departments Department for Children Schools and Families Foreign & Commonwealth Office Department for Culture Media and Sport Other Departments (< 100,000 m2)

Share of reported central civil estate by Total Occupancy Costs

Achieving cost effectivenessEfficiency remains a key objective for public sector occupiers andtranslates into not only cost reduction, but also spaceoptimisation across the central civil estate. OGC has setstandards for workspace efficiency that challenge organisationsto be more imaginative about the way they use space. Thesetting of standards and the ability to monitor performance raisesquestions and challenges, and space use has to be justified.Through benchmarking it is becoming increasingly obvious whereworkspace does not meet these standards, and increasinglydecision makers are taking notice. The pressure to save money in government is relentless andcentral government occupiers, in common with the privatesector, have focused attention on occupational space efficiency,becoming more rigorous in their management of property costswhilst balancing this with a focus on improving the quality of thework environment. Benchmarking enables businesses tomeasure and monitor both cost performance and spaceperformance. Furthermore, access to clearly structured andconsistent data aids transparency in reporting and benefits notonly the interests of business users and finance teams, but alsothe UK citizen.

“For any organisation, monitoring and measuring performanceare fundamental to improving the management of resources andto the delivery of services. Adopting a consistent and industryrecognised set of property codes and clearly defined dataelements has provided the common and credible data sourcewhich sits at the centre of our efforts to promote better and moreeffective property management across the public sector” -Richard Graham, Head of Property Performance Improvement,Office of Government Commerce.

SummaryObjective assessment of the performance of the governmentestate presents a wide range of complex challenges, but iscritical to a robust assessment of the efficiency of the estate. Thereal progress being made by government departments indelivering efficient, effective and sustainable property solutions isbuilt on quality information about their own performance and inbeing able to interpret it in a consistent and meaningful way.

Sources• OGC (2007), High Performing Property Implementation Plan -Delivering a transformed Government Estate.

• OGC (2009), The State of the Estate in 2008 - A report on theefficiency and sustainability of the Government estate.

AXA GROUPAXA is a global financial services organisation employing over200,000 people worldwide. Local organisations are largelyindependently managed, but when aggregated, AXA is spendingaround €1bn per annum on their operational real estate. They donot operate a central ‘command and control’ model, but areorganised around a matrix structure allowing local organisationsflexibility to determine their own business plans to includeregional property portfolio strategies

With this level of spend, it was recognised that it was importantto develop the ability to ensure consistent portfolio managementto the highest standards. Subsequently, a project was set up tobuild Global Corporate Real Estate Management capabilities.

ObjectivesPrior to this project, AXA used varying measurement standardsfor recording cost and space data across the organisation. Therewere also varying levels of organisational design and maturity interms of property management within each organisation. Byusing the IPD Codes, they were able to rapidly arrive upon aconsistent language through which to identify key data. Thismade it possible to gather a consistent and logical datasetwithout an extended conversation about which set of definitionsto use. The resultant data allows regions to communicate witheach other, to define a performance language and enablespresentation of concerted information to the Global ManagementBoard.

Key findingsIn reviewing a wide variety of (international) measurementstandards available, it was recognised that the IPD Codes areavailable in three languages, which significantly eased roll-out tomost geographical regions AXA occupies. Through the use of theIPD Cost, Space and Environment Codes, they were able torapidly construct and adopt a set of key metrics with which tomeasure performance globally.

The remaining challenges evolve around consistently collectingdata on occupants as it was found that the HR and Real Estateteams have different views of FTE and headcount.

ChallengesUsing the metrics gathered through the IPD methodology, AXA isnow able to identify what ‘best practice’ looks like, usingcorporate metrics focussing on cost per occupant, space peroccupant and energy consumption per occupant. Combiningsuch data with employee responses on productivity andsatisfaction provided a complete and balanced view ofperformance levels.


Categorise these metrics under ‘Employee, Efficiency andEnvironmental’ headers enabled application of a global strategyfor continuous improvement against these high level measures.By using these measures, central support to regional decision-making processes concerning portfolio strategies is nowpossible. This significantly simplifies a complex topic and helps toaccurately understand what is going on in the regions.

Next stepsAXA can now start to look at measures such as energyconsumption or cost per employee against local benchmarks, oracross regions and identify where there are issues. Byconducting internal comparisons and looking at the performance‘exceptions’, they can focus attention and additional supportwhere it is needed most. This is seen as particularly important inmanaging real estate risk.

As for environmental management, AXA is currently looking toimplement global energy consumption targets, based on theEnvironment Code methodology. This will help them managetowards their global target of a group-wide 20% reduction inenergy consumption.

ConclusionIn conclusion, the IPD Codes are instrumental in enablingstraightforward performance measurement, building credibilitythrough accurate data collection, measurement and analysis, andidentifying ‘best practice’ through benchmarking. The Codes areseen as particularly useful for corporate occupiers who arebecoming more global in their real estate thinking and regardedas essential tools in the Real Estate Director’s arsenal - not leastas it enables them to talk to board members in a concise andmeaningful fashion.

CENTRICACentrica secure and supply gas and electricity for millions ofhomes and businesses and offer a distinctive range of homeenergy solutions and low-carbon products and services. Centricabusinesses in the United Kingdom comprise:• British Gas• Centrica Energy • Centrica Storage • Dyno Group • Direct Energy

Property portfolioCentrica’s UK office portfolio comprises just over 128,000 m2 NIAacross 17 properties and accommodates just over 15,000 FTEoccupants. When Centrica Group Property embarked on theirperformance measurement exercise in 2005, they were interestedin gaining a deeper understanding of running costs of the officeestate and exploring ways in which costs could be manageddown without adversely affecting customer service levels.Following the award of the new four year Total FacilitiesManagement contract in 2005, Centrica Group Property werekeen to work in partnership with the service provider to put inplace the following four year plan. Key annual milestones for thecontract included:• 2005 - Mobilisation and transition of contract• 2006 - Deeper understanding of costs of service lines andrationalisation of TFM supplier base

• 2007 - Implementation and management of cost reductionprogram

• 2008 - Reshaping the management cost base and improvinginternal customer service

Use of Cost CodeCentrica chose to adopt and implement the IPD Cost Code forthe following reasons:• Ease of implementation - There was a close match betweenCentrica ledger codes and the IPD Cost Code categories

• Ease of use - Definitions in the Cost Code were clear andconcise, allowing the property team to have visibility acrossspend areas

• Industry standard - Centrica were interested in achieving ‘bestpractise’ in all areas, and the Code being recognised as theindustry’s ‘best practise’ for measuring occupancy costs fittedneatly into this paradigm

• Benchmarking - The IPD Cost Code allowed for robustbenchmarking in the utilities sector, thereby increasing theunderstanding of specific cost drivers


Key findingsActive use of the Cost Code and subsequent benchmarking ledto a number of key findings:• Opportunities for Centrica ledger codes to be adjusted andupdated to improve drilling down into cost lines and reflecthow service lines are managed

• Anomalies present at certain properties highlighteddisproportionate spends when compared to rest of theCentrica estate and the IPD Cost Code helped to identify keydrivers of operation costs in the estate

• Opportunities for cost reduction in service lines where thesecosts were out of sync with the utilities sector benchmark (e.g.repair and maintenance was in the upper quartile of the utilitiessector)

• Directions in restructuring the property management team, inorder to better meet the business need and achieve costefficiencies

ChallengesImplementation of the Code also helped to identify a number ofchallenges:• The level of detail and simplicity of the Cost Codemethodology made it’s implementation at Centrica a success.It is recognised at Centrica that ongoing education of the CostCode (especially with outsourced partners) is also vital to thissuccess, since the Code served as a ‘common language’which both parties understood and were able to apply. Thismutual standpoint, not only enhanced the relationship, but alsocontributed to the efficiency programme being delivered in2008/2009.

• In 2009, the Cost Code also formed the base to measure andbenchmark whether the TFM contract was meeting thebusiness need at the lowest possible cost (i.e. Value forMoney). The study concluded that the TFM contract couldmeet the business need, while achieving cost savings of 24%(see figure below).


Centrica indexed cost trends (£ per m2 NIA)

20050

20

40

60

80

100

120

140

160

180

200 RPI Property Occupation Repair and maintenance Security Cleaning Utilities Catering Facilities Management

2006 2007 2008 2009projection


In this chapter we highlight various ways that can help tosignificantly reduce the Total Occupancy Costs of anorganisation. First we focus on occupancy costs drivers beforehighlighting the more strategic decision that may influence themore important driver of the amount of space held by anorganisation.

6.1 Occupancy cost drivers

Whilst the IPD Cost Code will help identify cost differencesbetween one building or portfolio and another, it will not explainwhy these differences exist. Subsequently, it is important to fullyunderstand the major drivers that influence Total OccupancyCosts. An overview of the most relevant occupancy cost driversis shown in the following Table.

CA Property Occupation Cost drivers

CA1 Net Rent Location, accessibility, building type, use, construction, quality, age, condition, specification, length of accommodation contract and contract terms and conditions.

CA2 Unitary Charge As A1 plus service level agreements, structure and costs of financing, availability guarantees, term of contract, exit provisions etc.

CA3 Acquisition, Disposal and Removal Local/national fiscal policy.CA4 Local Property Taxes Local/national fiscal policy, rental/capital value, headcount.CA5 Parking Number of spaces, security control, adjacency, location, covered/multi-storey/open lot.CA6 Associated Facilities Type, location and specification.CA7 Occasional Space Workspace hours, location, service provided.CA8 Marketing and Promotion Type of building.

CB Adaptation and Equipment Cost drivers

CB1 Fit out and Improvement Specification, materials, finishes, quality and building location.CB2 Furniture and Equipment Specification, types, finishes, quality, quantity discount, delivery time, access and

installation/erection.

6 Cost optimisation


CC Building Operation Cost drivers

CC1 Consolidated Services Charge Services provided, type of property, location, rental value.CC2 Insurance Type of policy, special conditions/exceptions, number of buildings, locations and excess.CC3 Internal Repair and Maintenance Redecoration cycle, lease terms, quality standards, use, density of occupation and types

of internal finishes and surfaces.CC4 M&E Repair and Maintenance Initial installation guarantees and warranties, specification and distribution, intensity and

type of building use, cooling/heating loads, M&E equipment.CC5 External and Structural Repair Building construction, lease terms, design and external building fabric.

and MaintenanceCC6 Minor Improvements User demand.CC7 Internal Moves Rate of churn, inclusion of furniture and storage policy.CC8 Reinstatement Scope of adaptations and terms of accommodation contract.CC9 Security Specification of fixed equipment, hours of manned security cover, number of access

points, size of grounds, remote security policy, patrol policy, staff per square metre, building use.

CC10 Cleaning Cleaning specification and frequency, surface types, special cleaning requirements, quantity discount, local cost of labour.

CC11 Waste Disposal Quantity of waste and type. Recycling targets, national /local arrangements or legal requirements.

CC12 Internal Plants and Decorations Plant policy, specification and frequency of plant maintenance etc.CC13 Grounds Maintenance Type and size of grounds.CC14 Water and Sewerage Staff occupancy and litres per day supplied.CC15 Energy Operating hours, building age, air conditioning.

CD Business Support Cost drivers

CD2 Catering Specification of canteen areas, food subsidy policy, meals per day, opening hours, number/type vending machines per square metre.

CD3 Reception Services Number of visitors per day, opening hours, local cost of labour.CD4 Courier and External Distribution Number/size/weight/destination/delivery time/tracking requirements of letters and

Services parcels per week.CD5 Post Room and Internal Distribution Number/size/weight of letters and parcels delivered to the building. Packaging, opening

Services and distribution requirements.CD6 Reprographics Number, type and use of photocopiers. Volume per month of copies made.CD7 Disaster Recovery Number, specification and location of workstations required as percentage of total

workstations. Dedication and sharing limits with other disaster recovery customers of service provider (for example 1 of 6 or 1 of 12 per allocated workstation).

CD8 Transport Specification of staff transport policy including transport subsidies. Number of executivecars and chauffeurs.

CD9 Archiving Archiving and retrieval policy.

CE Property Management Cost drivers

CE1 Real Estate Management Rate of real estate expansion/contraction.CE2 Facilities Management Number, size and complexity of service contracts under management.CE3 Project Management Number, size and complexity of capital projects.CE4 Other Management Number, size and complexity of tasks.

6.2 Strategic decisions

Recognising that the amount of space held by an organisation isundoubtedly the most important cost driver, this section focuseson space charging, serviced offices, and property outsourcing.For more information on achieving favourable space ratios, feelfree to download a complimentary copy of the IPD Space Codeat www.ipdoccupiers.com.

Space chargingThe essence of space charging is the fair allocation of costsbased on the utilisation of space and services. One of the mainbenefits is that it forces businesses and business units tocarefully consider requirements concerning space allocation andservice needs as well as office locality and proximity to clients.This appraisal of ‘affordability’ will typically drive back-officefunctions out of the most expensive locations and provideimpetus to space efficiency initiatives. It should be noted,however, that accuracy and transparency concerning bothproperty occupation costs and usable floor area are essential toeffective space charging. Subsequently, a constructive audit ofinformation is to be carried out prior to space charging.

In its most simple form, space charging can be based on theamount of usable floor area allocated to a business or businessunit. In a more complex form, space charging can be based onthe actual utilisation of space and services within a building.These two extremes can be described below:• Allocation - Total Occupancy Costs for property are divided bythe total amount of usable floor area in the estate or building,with the charge for each business unit being calculated on theper unit space charge multiplied by the usable floor areaoccupied.

• Utilisation - Each space is charged according to who books oruses it, similar in charging terms to a serviced office or officehotel

The utilisation approach will require more resources to supporteffective operation. However, it will typically lead to more effectiveuse of space as well as a greater understanding of how andwhen space is actually utilised. In reality, the balance betweenaccuracy and practicality will result in a mixed-mode approach toformulate the space charge for an organisation.


CF Information Technology Cost drivers

CF1 Infrastructure Geographic location and number of sites, capacity and bandwidth of infrastructure.CF2 Hardware Number, specifications and functionality of phones and number, specifications and

capacity of computers/servers.CF3 Software Number, specifications and licensing structure of software packages.CF4 Support Number, size and complexity of tasks.

Occupancy cost drivers


Space charging based on actual utilisation of space and servicewithin a building or any mixed-mode approach can be calculatedas follows:

In this formula, shared occupancy costs and use-basedoccupancy costs could be determined as follows:

Shared Use-based

CA1 Net Rent CA5 Parking ChargesCA2 Unitary Charge CA6 Associated FacilitiesCA3 Acquisition, Disposal and Removal CA7 Occasional SpaceCA4 Local Property Taxes CA8 Marketing and Promotion

CB1 Fit out and Improvement CB2 Furniture and Equipment

CC1 Consolidated Services Charge CC7 Internal MovesCC2 Insurance CC8 ReinstatementCC3 Internal Repair and Maintenance CC9 SecurityCC4 M&E Repair and MaintenanceCC5 External and Structural Repair and MaintenanceCC6 Minor ImprovementsCC8 ReinstatementCC9 SecurityCC10 CleaningCC11 Waste DisposalCC12 Internal Plants and DecorationsCC13 Grounds Maintenance

CD2 Catering CD4 Courier and External Distribution ServicesCD3 Reception Services CD6 ReprographicsCD5 Post Room and Internal Distribution Services CD8 TransportCD7 Disaster Recovery CD9 Archiving

CE1 Real Estate ManagementCE2 Facilities ManagementCE3 Project ManagementCE4 Other Management

CF1 Infrastructure CF2 HardwareCF4 Support CF3 Software

Typical split between shared occupancy costs and use-based occupancy costs

Utilised floor areaShared occupancy

costsUse-based

occupancy costsTotal floor areaX +( )

Basic formula for space charging


Serviced officesServiced offices or office hotels allow for flexible use of space asand when it is needed. Typically, core services are incorporatedwithin the base charge whilst charges for on-demand servicessuch as photocopying are added separately. Base chargesshould be allocated to category CA2 Unitary charge, whereasadditional charges should be allocated to the relevant costcategory.

The following invoice from a serviced office can be categorised asfollows:

Base charge A2 Unitary charge

Additional charges

Reception services- Travel and transport bookings NA- Courier arrangements CD4 External distribution costs

Catering services- Refreshments CD2 Catering and vending costs- Business catering CD2 Catering and vending costs

Communication services- Line rental CF1 Infrastructure costs- Incoming faxes CD5 Internal distribution costs- Outgoing mail CD4 External distribution costs

Reprographic services- Photocopying CD6 Reprographics costs- Binding and laminating CD6 Reprographics costs

Meeting services- Meeting room hire CA2 Unitary charge- AV equipment hire CF2 Hardware costs

Cost categorisation for serviced offices

Property outsourcingProperty outsourcing tends to operate under long term contracts of15 to 25 years, typically with break clauses to leave the premisesbefore the end of this contract. More often than not, services arebundled into the contract sum (similar to serviced offices). In suchcases it becomes very difficult - if not impossible - to disaggregatethe total occupancy costs.

Where bundled services are included within the overall charge forthe building there is normally an element of whole life costing, takinginto account the gradual depreciation of the asset throughout itsexpected life. Such whole life costing should be ignored, as it is animplicit part of the property charge and can only normally becalculated by suppliers. The same principle applies if there is a riskpremium payable for early termination of the contract agreement forany one or more buildings.

In addition to the unitary charge stored under CA2, the followingcosts are typically charged as extra costs and should be recordedunder the appropriate cost category:

CA4 Local Property TaxesCB1 Fit out and ImprovementCB2 Furniture and EquipmentCC2 InsuranceCC7 Internal MovesCC9 SecurityCC14 Water and SewerageCC15 EnergyCD2 CateringCD8 TransportCD9 ArchivingCE1 Real Estate ManagementCE2 Facilities ManagementCE3 Project ManagementCE4 Other ManagementCF1 InfrastructureCF2 HardwareCF3 SoftwareCF4 Support

Cost categorisation for outsourced properties

BCO (2005), BCO Guide: Best practice in the specification foroffices, Reading: British Council of Offices.

BIFM (1996), BIFM Facilities Management MeasurementProtocol, Essex: Saffron Walden.

BMI (2007a), Review of Occupancy Costs, London: Building CostInformation Service.

BMI (2007b), Review of Maintenance Costs, London: BuildingCost Information Service

BOMA (2004), Functional Accounting Guide & Chart of Accountsfor Industrial Properties, Washington: Building Owners andManagers Association.

BOMA (2008), Experience Exchange Report, Washington:Building Owners and Managers Association.

CBI (2008), Property for Business - An essential guide for seniorexecutives, London: Confederation of British Industry.

GEFMA (1996), Kostenrechnung im Facility Management, Bonn:Deutscher Verband für Facility Management.

IFMA (2008), Operations and Maintenance Benchmarks, USA:International Facility Management Association.

IFMA (2009), Operations and Maintenance Benchmarks Survey,USA: International Facility Management Association.

IMA (2008), Practice of Management Accounting, Montvale:Institute of Management Accountants.

IPD (2007), IPD Environment Code - Measuring theEnvironmental Performance of Buildings, London: IPD Occupiers.

IPD (2008), IPD Space Code - Measuring the SpacePerformance of Buildings. London: IPD Occupiers.

IPD Occupiers (2009), Corporate Occupier Trends 2008, London:IPD Occupiers.

NEN 2580 (2003), Terms of facilities - Classification anddefinition, Delft: Netherlands Normalisation Institute.

PCA (2000), Asset Performance Scorecard, Australia: PropertyCouncil of Australia.

PCA (2008), Method of Measurement, Australia: Property Councilof Australia.

REN (1993), Real Estate Norm, Nieuwegein: Stichting Real EstateNorm Nederland.

REN (1994), Real Estate Norm Quick Scan, Nieuwegein:Stichting Real Estate Norm Nederland.

RICS (2007) Code of Measuring Practice - Service Charges inCommercial Property, Coventry: Royal Institution of CharteredSurveyors.

RICS (2007), Code of Measuring Practice - A guide for propertyprofessionals, Coventry: Royal Institution of Chartered Surveyors.

Williams, B. (2001), Facilities Economics in the European Union,Bromley: Building Economics Bureau.

References


In the spirit of moving towards a single global standard for themeasurement of occupancy costs, this appendix compares theIPD Cost Code with three key standards, mapping the maincategories of each standard to our cost categories.

1. The BOMA Chart of Accounts2. The NEN Terms for Facilities3. The RICS Code of Measuring Practice

This appendix also describes the objectives of the PISCES dataexchange standards for occupancy costs

BOMA Chart of AccountsThe BOMA Chart of Accounts is designed for the use of propertymanagers and owners in the United States and is used byvarious corporate occupiers to record their property costs. The table below reconciles the BOMA standard with the IPDCost Code.

Current Assets10000-19000 NA

Current Liabilities20000-29000 NA

Revenue/Income30000 Industrial Rent CA131000 Office Rent CA132000 Parking Income CA533000 Other Space Rent CA634000 Additional Tenant Service Income NA34100 Cleaning CC934200 Repairs/Maintenance CC3-CC634300 Utility (after-hour charges) CC14, CC1534400 Security CC9

Operating expenses40000 Cleaning Expenses40100 Payroll, Taxes, Fringes CC1040200 Routine Contract Services (Interior) CC1040300 Specialised Contract Services CC1040400 Supplies/Materials/Miscellaneous CC1040500 Trash Removal CC1141000 Repairs/Maintenance41100 Payroll, Taxes, Fringes CC3-CC641150 Comprehensive R/M Contract CC3-CC641200 Elevator Contracts/Materials CC441300 HVAC Contracts/Materials CC441400 Electrical Contracts/Materials CC441500 Structural/Roofing CC541600 Plumbing CC341700 Fire and Life Safety CC441800 General Building R/M (Interior) CC341850 General Building R/M (Exterior) CC542000 Utilities

42100 Electricity CC15a42200 Gas CC15b42300 Fuel Oil CC15c42400 Purchsed Steam CC15d42500 Purchsed Chilled Water CC15d42600 Water CC14a42700 Sewer CC14b42800 Cable CF143000 Roads/Grounds Expenses CC1344000 Security Expenses CC945000 Administrative45100 Payroll, Taxes, Fringes CE245200 Allocated Administrative Fee CE245300 Management Fees CE245400 Professional Fees CE245500 General Industrial/Office Expense CE245600 Employee Expenses CE246000 Parking Operations CC1347000 Fixed Expenses47100 Real Estate Taxes CA447200 Personal Property Taxes CA447300 Other Taxes CA447400 Building Insurance CC247500 Licenses/Fees/Permits CA4

Non-recoverable expenses50000-59000 NA

Amortization and Depreciation Expenses60000-69000 NA

Financial Income and Expenses70000-79000 NA

Appendix A - Reconciliation Guide


BOMA Chart of Accounts


NEN Terms for FacilitiesThe Dutch standard NEN 2748 divides occupancy costs into fivemain classes:1 Accommodation (maintenance, renovation, etc.)2 Services and resources (cleaning, catering, etc.)3 Information and communication technology (hardware,software, etc.)

4 External facilities (external accommodation, home workplaces,etc.)

5 Facilities management (working conditions, environment, etc.)

The structure of the NEN standard contrasts with that used inIPD Cost Code, but the table below attempts to reconcile thetwo approaches. It is interesting to note the variety of differentIPD Cost Code categories within the NEN classification.

Accommodation costs1.1 Accommodation1.1.1 Provision of buildings CA1, CA21.1.2 Provision of terrain NA1.1.3 Provision of parking CA51.2 Taxes and Levies1.2.1 Taxes CA41.2.2 Levies CA41.2.3 VAT compensation all1.3 Insurance CC21.4 Maintenance1.4.1 Maintenance - owner CC4-CC61.4.2 Maintenance - tenant CC4-CC61.4.3 Maintenance - terrain CC131.5 Alterations1.5.1 refurbishment CB11.5.2 reinstatement CC81.6 Utilities1.6.1.1 Natural gas CC15b1.6.1.2 Fossil fuels CC15c1.6.1.3 District heating CC15d1.6.1.4 Electricity CC15a1.6.1.5 Water CC141.7 Management1.7.1 Acquisition and Disposal CE11.7.2 Exploitation CE11.8 Interest NA

Support service costs2.1 Catering services2.1.1.1 Company restaurant CD2a2.1.1.2 Workplace service CD2c2.1.1.3 Vending machines CD2b2.1.1.4 Catering for events NA2.2 Risk control

2.2.1 Security CC92.2.2 Prevention CC92.2.3 Reception CD32.3 Cleaning servcies2.3.1 Interior cleaning CC102.3.2 Glass cleaning CC102.4 Moves management2.4.1 Internal moves CC72.4.2 External moves NA2.5 Document management2.5.1 Document creation NA2.5.2 Document processing CD52.5.3 Document reproduction CD62.5.4 Document archiving CD92.6 Waste management2.6.1 Waste collection CC112.6.2 Waste removal CC112.7 Space provision services NA

Technology costs3.1 Information Technology3.1.1 External infrastructure CF1a3.1.2 Internal infrastructure CF1b3.1.3 Hardware CF23.1.4 Software CF33.2 IT support services CF4

External facilities costs4.1 External facilities4.1.1 External accommodation CA64.1.2 External workplaces CA74.1.3 Conveyance of persons CD8

Management costs5.1 Facilities management CE25.2 Implementation CE4

NEN Terms for Facilities


RICS Code of Measuring PracticeThe RICS Code of Measuring Practice - Service Charges inCommercial Property is designed to classify service costsincurred by the landlord back to the tenant, primarily within theUK property market. As such, the costs are a small part of theTotal Occupancy Costs incurred by the tenant. The table belowshows an approximate mapping of the main RICS categories toIPD Cost Code. IPD Occupiers recommend that this costmapping is carried out so that tenants can properly compare thecosts incurred at their different buildings.

PISCES data exchange standardData exchange standards are able to offer occupiers theprospect of reduced data transfer costs, increased speed ofprocess and improved data quality and accuracy. These areessential in the efficient automation of data exchange betweenthe corporate occupier and its suppliers.

The Property Information Systems Common Exchange Standard(PISCES) is a data exchange standard that operates globally forall property activities and functions under the banner of OpenStandards Consortium for Real Estate (OSCRE). The PISCESOccupancy Costs Workgroup aims to develop an internationalstandard that will enable the automation and standardisation ofoccupancy data transfer to achieve the objectives set out in theprevious paragraph.

The PISCES Occupancy Costs data exchange standard is atechnical document for data specialists and can be found atwww.pisces.co.uk.

Management1 Management fees CE12 Accounting fees CE13 Site management resources CE24 Health, safety and environmental CE4

management

Utilities5 Electricity CC15a6 Gas CC15b7 Fuel oil CC15c8 Water CC14

Soft services9 Security CC910 Cleaning and environmental CC10, CC11,

CC1411 Marketing and promotion CA8

Hard services12 Mechanical and electrical services CC4a13 Lift and escalators CC4b14 Suspended access equipment CC4c15 Fabric repairs and maintenance CC5

Income16 Interest CC117 Income from commercialisation CA1

Insurance18 Engineering insurance CC2c19 All risks insurance cover CC2a, CC2b20 Terrorism insurance CC2d

Exceptional Expenditure21 Buildings insurance CC822 Forward funding CC8

RICS Code of Measuring Practice

In this appendix we provide an overview of all relevant cost itemswhilst explaining how they relate to the cost categories set out inthis IPD Cost Code. For more information on cost items notincluded in the appendix, please feel free to contact IPDOccupiers.

Cost item

Access control systems, readers and passes CC9Acquisition tax and duty CA3Acquisition, disposal and removal CA3Acquisitions and disposals CE1Adaptation and equipment CBAir conditioning (fit out and improvement) CB1Air conditioning (repair and maintenance) CC4Alarms (security) CC9Archiving CD9Archiving systems CD9Associated facilities CA6

Badges CC9Blackberries CF2Blinds CB2Borders CC13Building operation CCBurst pipes (premiums) CC2Bus schemes CD8Business support CD

Cables and wires CF1Carpeting CB1Carpets (cleaning) CC10Catering CD2Catering equipment CD2CCTV CC9Central control (security) CC9Central control (telephones) CF2Chairs (cleaning) CC10Chairs (furniture and equipment) CB2Charges (real estate) CE1Christmas decoration CC12Cladding CC5Cleaning CC10Cleaning (internal plants and decorations) CC12Collection (mail) CD5Composted waste disposal CC11Concierge services CE2Condition surveys CE2Confidential waste disposal CC11Consolidated Services Charge CC1Contract negotiations CE1Courier and external distribution services CD4Crockery and cutlery CD2

Appendix B - Mapping Guide



Cost item

Curtains CB2

Design and layout CE2Desk lights CB2Desks (cleaning) CC10Desks (furniture and equipment) CB2Desktop phones CF2Despatch (mail) CD5Detectors CC9Disposal costs CA3Distribution (mail) CD5District heating CC15Doors (cleaning) CC10Drainage CC5Drapes CB2Drinks CD2Dusting (internal plants and decorations) CC12

Earthquake (premiums) CC2Electrical installations (fit out and improvement) CB1Electrical installations (repair and maintenance) CC4Electricity CC15Energy CC15Environmental management CE4Environmental tax CA4Equipment (internal moves) CC7Equipment (repair and maintenance) CC3Escalators CC4Explosion (premiums) CC2External and structural repair and maintenance CC5External finishes CC5External walls CCf

Facilities management CE2Feeding (internal plants and flowers) CC12Fences CC9Fenestration CC5Filing cabinets CB2Fire (premiums) CC2Fire extinguishers CB2Fire services CC4Fit out (internal moves) CC7Fit out (repair and maintenance) CC3Fit out and improvement CB1Fittings CB1

Cost item

Fixtures CB1Flood (premiums) CC2Flooring (fit out and improvement) CB1Floors (cleaning) CC10Flowers (external) CC13Flowers (internal) CC12Food CD2Foundations CC5Furniture (churn) CC7Furniture (repair and maintenance) CC3Furniture and equipment CB2

Garden stores CC13Gas CC15General waste disposal CC11Greenhouses CC13Grounds maintenance CC13

Handsets CF2Hardware CF2Health and safety CE2Help desk CE2

Identity cards CC9Information management CE4Information Technology CFInfrastructure CF1Insurance CC2Internal moves CC7Internal Plants and Decorations CC12Internal repair and maintenance CC3Internal walls (cleaning) CC10Internal walls (fit out and improvement) CB1Intruder detection systems CC9IT equipment (cleaning) CC10

Kitchen equipment CD2

Laptops CF2Lawns CC13Liability for excess CC2Lifts CC4Lighting (cleaning) CC10Lighting (fit out and improvement) CB1Lighting (security) CC9Line charges CF2

Cost item

Litter clearance CC13Local property taxes CA4Loss of rent (premiums) CC2Loudspeakers CC9

M&E repair and maintenance CC4Maintenance contract (security) CC9Marketing and Promotion CA8MDAs CF2Mechanical handling equipment CB2Minor improvements CC6Mobex phones CF2Mobile phones CF2Mobile phones (not call costs) CF2Municipal tax CA4

Notional rent CA1

Occasional space CA7Oil CC15Opening (mail) CD5Operating systems CF3Other management CE4

PABX CF2Packaging (mail) CD5Parking areas CC13Parking charges CA5Partitioning (fit out and improvement) CB1Partitions (cleaning) CC10Pavements CC13Pavilions CC13PCs CF2Pedestals (cleaning) CC10Pedestals (furniture and equipment) CB2Pest control CC10Photocopiers CD6Post room and internal distribution services CD5Printers CD6Project management CE3Property management CEProperty occupation CAPruning (internal plants and flowers) CC12

Quality management CE4

Rates CA4

Cost item

Real estate management CE1Reception services CD3Recording (mail) CD5Recycled waste disposal CC11Redecoration (external) CC5Redecoration (internal) CC3Reinstatement CC8Removal costs CA3Rent CA1Rent paid CA1Rental value CA1Reprographics CD6Retrieval systems CD9Road blocks CC9Roadways CC13Roof CC5

Sanitary waste disposal CC11Security CC9Security contractors CC9Security staff CC9Servers CF2Service charge CC1Sewerage CC14Shelving CB2Shop fronts CB1Signage (fit out and improvement) CB1Snacks CD2Snow clearance CC13Soft furnishings CB2Software CF3Space heating CB1Sprinkler systems CC4Stamping (mail) CD5Storage cabinets CB2Strategic planning and reporting CE1Subsidence (premiums) CC2Subsidy (food and drink) CD2Suppport CF4Suspended ceilings (cleaning) CC10Suspended ceilings (fit out and improvement) CB1Switchboard systems CF2

Tables CB2Telephones CF2


Cost item

Telephones (cleaning) CC10Terrorism (premiums) CC2Tiles (cleaning) CC10Tiling CB1Toilets (cleaning) CC10Toxic waste disposal CC11Transport CD8Travel subsidy CD8

Uniforms (reception) CD3Uniforms (security) CC9Unitary charge CA2Urinals (cleaning) CC10User software CF3

Valuations (real estate) CE1Vehicular access control CC9Voicemail CF2Vouchers (food and drink) CD2

Wall linings CB1Walls (external) CC5Walls (internal) CB1Waste compactors CB2Waste disposal CC11Water and plumbing CC4Water and sewerage CC14Water supply CC14Watering (internal plants and flowers) CC12WCs (cleaning) CC10Window boxes CC13Windows (cleaning) CC10Wireless components CF1Woodwork and joinery CB1Workplace management CE2Works of art CB2


In this appendix we provide a full list of cost components andunderlying data items to collect for office buildings. On the firstpage you will find the contextual measures related to the propertyitself, its users and the workstations. On the subsequent pagesyou will find all cost measures to build a clear picture of the costperformance of an office building.

Appendix C - Measurement Template



1 Property

1A Office Address (please complete all fields)

1AA Occupier name1AB Street1AC City1AD Postcode

1B Industry Sector (please tick one box)

1BA Public Administration1BB Oil, Gas and Utilities1BC Telecom and Media1BD Banking and Insurance1BE Pharmaceutical and Research1BF Other business activities

1C Building Type (please tick one box)

1CA Headquarter office1CB Client-facing office1CC Administrative office1CD Call centre1CE Data warehouse

1D Building Location (please tick one box)

1DA Central business district1DB Other town centre1DC Business park1DD Rural location

1E Building Condition (please tick one box)

1EA As new1EB Minor defects1EC Major defects

2 Users

2A Employees (please complete both fields)

2AA Headcount2AB FTE equivalent

2B Contractors (please complete both fields)

2BA Headcount2BB FTE equivalent

2C Visitors (please complete both fields)

2CA Headcount2CB FTE equivalent

3 Workstations

3A Open Workstations (please complete relevant fields)

3AA Open offices3AB Touch downs

3B Semi-open Workstations (please complete relevant fields)

3BA Cubicles3BB Team spaces3BC Work lounges

3C Enclosed Workstations (please complete relevant fields)

3CA Private offices2CB Share offices3CC Team rooms3CD Study booths

4 Core operating hours

3 Workstations


CA Property Occupation

CA1 Net Rent

CA1a Rent paidCA1b Rental valueCA1c Notional rent

CA2 Unitary Charge

CA3 Acquisition, Disposal and Removal

CA4 Local Property Taxes

CA5 Parking Charges

CA6 Associated Facilities

CA7 Occasional Space

CA8 Marketing and Promotion

CB Adaptation and Equipment

CB1 Fit out and ImprovementCB2 Furniture and Equipment

CC Building Operation

CC1 Consolidated Services Charge

CC2 Insurance

CC2a Buildings InsuranceCC2b Contents InsuranceCC2c Engineering InsuranceCC2d Terrorism insurance

CC3 Internal Repair and Maintenance

CC4 M&E Repair and Maintenance

CC4a M&E servicesCC4b Lifts and escalatorsCC4c Suspended access equipmentCC4d Other M&E costs

CC5 External and Structural Repair and Maintenance

CC5a Planned external and structural maintenanceCC5b Unplanned external and structural repair

CC6 Minor Improvements

CC7 Internal Moves

CC8 Reinstatement

CC9 Security

CC10 Cleaning

CC10a Interior cleaningCC10b Exterior cleaning

CC11 Waste Disposal

CC11a General waste disposalCC11b Toxic waste disposalCC11c Confidential waste disposalCC11d Sanitary waste disposalCC11e Recycled waste disposalCC11f Composted waste disposal

CC12 Internal Plants and Decorations

CC13 Grounds Maintenance

CC13a Hard landscaping costsCC13b Soft landscaping costsCC13c Litter and snow clearance

CC14 Water and Sewerage

CC14a Water supplyCC14b Sewerage costs


CC15 Energy

CC15a ElectricityCC15b GasCC15c Fuel / oilCC15d District heatingCC15e Other energy

CD Business Support

CD2 Catering

CD2a General catering costsCD2b Vending machine costsCD2c Meeting room hospitality

CD3 Reception Services

CD4 Courier and External Distribution Services

CD5 Post Room and Internal Distribution Services

CD5a Post room servicesCD5b Distribution services

CD6 Reprographics

CD6a Central reprographicsCD6b Distributed reprographics

CD7 Disaster Recovery

CD8 Transport

CD9 Archiving

CD9a On-site archivingCD9b Off-site archiving

CE Property Management

CE1 Real Estate Management

CE1a In-house real estate managementCE1b Outsourced real estate management

CE2 Facilities Management

CE2a In-house facilities managementCE2b Outsourced facilities management

CE3 Project Management

CE3a In-house project managementCE3b Outsourced project management

CE4 Other Management

CE4a Environrmental managementCE4b Information managementCE4c Quality management

CF Information Technology

CF1 Infrastructure

CF1a External infrastructureCF1b Internal infrastructure

CF2 Hardware

CF2a TelecommunicationsCF2b Comnputers

CF3 Software

CF3a Operating systemsCF3b User software

CF4 Support

CF4a Internal support staffCF4b External support staff

IPD Occupiers1 St. John’s LaneLondon EC1M 4BLUnited Kingdom

T +44 (0) 20 7336 9200F +44 (0) 20 7336 9399

E [email protected]

In association with:

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ipd space code

real estate industry

property cost information

ipd environment code

ipd cost codemeasuring

real estate solutions

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